Oil prices

The price of oil has been falling steadily and is now at around $88 a barrel, although this price fall has not translated into lower energy prices and lower fuel prices. The reason for the price is is that the oil producing nations are producing a great deal of the stuff. more than the market can take right now. Apparently oil from wells control by the Islamic State of Syria and Iraq is still being sold at a very large discount, depressing the price and the oil producing nations need money to try to solve the problems of war, insurrection and domestic discontent, and the main way of getting money is to sell oil.

I do not have a crystal ball and cannot foresee what the future oil price will be, as it now depends on political events rather than on simple economics and geology. It is likely that prices will fall for as long as war and insurrection lasts, and then fall some more if peace comes and nations try to rebuild their economies for peace, as the oil producers sell more oil to raise more money. Add to that any economic growth that might come from the rest of the world. If China and the European Union do resume their economic growth then that will increase demand, leading to much higher oil prices.

Meanwhile the USA is producing more oil than ever and not exporting oil. Any change in US oil production and exporting policy will affect oil prices from the moment that change takes effect.

Falling oil prices inevitably lead to more oil consumption, which has a knock on effect on climate change.


2 Responses

  1. Do falling oil prices really lead to more consumption?

    I thought it worked the other way round. Where the supply remains constant, falling consumption leads to lower prices. i.e deflation until supply is reduced to match demand.

    Which ever way you look at it, though, surely falling consumption is good news on every front bar OPEC’s members’ interests.

  2. Not oil but still power related, still, did you get it.


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