If the term ‘oil’ didn’t quite come out clearly in the heading, wake up!
The roller coaster ride with invariable high crests and
comparably lower troughs in oil prices has made many run for cover. The volatility has resulted in unprecedented economic turmoil to say the least. From skyrocketing highs to touch the peaks of $147 per barrel in July, global oil prices have fallen below $114 per barrel when the magazine went for print. Well, the downward trend, as expected by many, is not going to bring much of a respite from the oily blows that the global market has been taking below the belt since last year.
“Oil is a commodity with both a highly price inelastic supply and demand curve. In the long-term growth in production and delivery of energy sources would reach growth in demand, and at this point oil prices would likely post a fairly aggressive decline”, explains Michael R. Englund, Principal Director and Chief Economist, Action Economics, on the current trend. But not for current levels. The OPEC alliance has lowered its forecast for oil demand growth down from 1.20% to 1.17% for 2008 alluding to the weak global economy resulting in the current price slip. The high energy costs have forced countries across the globe to cut down fuel consumption resulting in crude prices being plummeted. Nevertheless, the rising prices of oil is a supply driven phenomenon rather than demand driven. There was always enough fuel in the world to meet rising demand, but supply has been artificially curbed.
Thus, while a further fall in the price of the golden fluid is expected to be restrained because of the higher demand from Brazil, Mexico and countries from Asia and the Middle-East, restrained supply from OPEC would force the prices up. Besides other factors like the storm in Gulf of Mexico [which temporarily missed the region], supply disruption in Africa and delay in projects in Brazil can further push the price up. This is the time when a cautious approach is required. Countries must consider alternate sources of fuel rather than sitting comfortably since the prices are going down.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
The roller coaster ride with invariable high crests and
comparably lower troughs in oil prices has made many run for cover. The volatility has resulted in unprecedented economic turmoil to say the least. From skyrocketing highs to touch the peaks of $147 per barrel in July, global oil prices have fallen below $114 per barrel when the magazine went for print. Well, the downward trend, as expected by many, is not going to bring much of a respite from the oily blows that the global market has been taking below the belt since last year.“Oil is a commodity with both a highly price inelastic supply and demand curve. In the long-term growth in production and delivery of energy sources would reach growth in demand, and at this point oil prices would likely post a fairly aggressive decline”, explains Michael R. Englund, Principal Director and Chief Economist, Action Economics, on the current trend. But not for current levels. The OPEC alliance has lowered its forecast for oil demand growth down from 1.20% to 1.17% for 2008 alluding to the weak global economy resulting in the current price slip. The high energy costs have forced countries across the globe to cut down fuel consumption resulting in crude prices being plummeted. Nevertheless, the rising prices of oil is a supply driven phenomenon rather than demand driven. There was always enough fuel in the world to meet rising demand, but supply has been artificially curbed.
Thus, while a further fall in the price of the golden fluid is expected to be restrained because of the higher demand from Brazil, Mexico and countries from Asia and the Middle-East, restrained supply from OPEC would force the prices up. Besides other factors like the storm in Gulf of Mexico [which temporarily missed the region], supply disruption in Africa and delay in projects in Brazil can further push the price up. This is the time when a cautious approach is required. Countries must consider alternate sources of fuel rather than sitting comfortably since the prices are going down.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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