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By: Mabelle Wheeler
Because of oil markets, and an energy crisis that’s been going on for some time, oil, electricity and gasoline don’t come cheap. In this day and age oil and natural resources cost more to produce, more to buy, and this in turn affects the economy. Price controlling, delayed price adjustments, and the lack of a free market are all situations that lead to higher prices. Oil markets are primarily driven by national oil companies of nations such as Kuwait, Norway, Saudi Arabia, United Arab Emirates and Venezuela. Some of these companies are affiliated with the OPEC or Organization Of Petroleum Exporting Countries, a cartel that largely determines the global price of oil. Whenever oil quotas are reduced, the supply diminishes and the price goes up substantially. Heating, power generation and particularly transportation demand the greatest amount of oil. Since all three industries and many more are powerful in the United States, not surprisingly the US uses some 25% of the entire worldwide oil production. The oil market has had a troublesome history for decades, and oil supply problems continue to affect the world and inflate oil prices. In 1973, an OPEC embargo act (a government order imposing a trade barrier) was called in response to the western world’s backing of Israel. In 1979 the Iranian revolution caused an energy crisis. 1990 saw the Gulf War and a dramatic increase in oil price. In 2000, there was fuel protest in the United Kingdom, due to high oil prices as well as high taxation on fuel. 2004 and onward saw more restricted quotas of oil and thus less supply, even with increasing demands, leading some nations to explore oil alternatives. All of these significant events have left a mark on oil markets and the effects are still felt today. However, 2004-2006 also saw other major events that drastically affected the supply and price of oil. The US-Iraq war has taken it’s toll on the industry; Iran’s nuclear program and unrest in Saudi Arabia continue to start rumors and thus affect the oil markets ahead of schedule. Hurricane Katrina in 2005 all but destroyed the supply-flow from offshore rigs in the Gulf Coast. This was the largest source of oil for the United States. Some believe that there will eventually be a shortage of natural resources, especially with the amount of oil being regularly produced. Others, however, believe that prices will eventually go down as a “price bubble” (meaning an explosion followed by a significant drop) is destined to happen. Experts claim that only long-term speculation of oil supply and demand, as opposed to literal figures, is making the price skyrocket. The great debate continues as dollar prices continue to go up every 3000 miles.
Article Source: http://www.article-hangout.com
Mabelle Wheeler is the editor of Oil Marketer, an online magazine of oil market news, as well as a contributory writer for the commodities column at Finance Markets.
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