Chapter 11: Foreign Exchange Rates Available to Purchase

The oil industry is amongst the most global of industries in the world. No matter where an oil field is, the materials, components, and equipment that enable it to produce oil may be supplied by numerous different countries, and even what it produces may be sold abroad. So with money being spent in, and also being received from, different countries, petroleum economists have to deal with cash flows that are in many different currencies.

It goes without saying, however, that the net cash flows petroleum economists ultimately derive must be in one single currency. Therefore, they must convert currencies from one—or, indeed, several—to another. And that’s done using foreign exchange conversion rates, which are forecasts of, say, how many Canadian dollars will be equivalent to a certain number of euros in future years, or how many Malaysian ringgit will be equivalent to a certain number of Thai baht.