The Price Of West Texas Intermediate

Another cause for the decline in oil prices is caused by an increase in consumers purchasing more fuel efficient vehicles, such as hybrid or electric vehicles. In many countries today, especially in North America, there has been an increased demand for fuel efficient vehicles. This is evident in TV commercials which are advertising more and more vehicles that get 40 to 50 miles per gallon, and by the ever increasing commercials for electric vehicles. Consumers are tired of paying outrageous prices for oil and are demanding more for their money. As this demand continues to grow, the demand for oil will decrease.

The reason of the fall in oil prices are the constant change of demand. The need for the oil is actually stagnant. Crude oil is becoming a product of the past. Today, you can harvest energy from solar, wind, water, heat, and waves. According to The Economist, “The use of fossil fuels in the rich world is mostly falling. Emerging economies are not currently taking up the slack”.

The oil producing nations in the Mideast currently are meeting to discuss increasing production so that crude prices will decline from its current price of more than $30 a barrel to the region of $25 (Georgy, 2000).

The United States consumes more than 25% of the world’s petroleum products which is a large percentage, considering only 3% of the world’s oil reserves are produced by the United States. Given the demand for petroleum products such as gasoline, understanding why Crude oil prices have skyrocketed in recent years, is not hard. According to the article “Ending America’s Oil Addiction,” the surge in crude oil prices can be reduced in large part to the simple concepts of supply and demand. (Cooper, 2008)

Long-term: Low profits cannot be maintained for so much time. In some time in the near future, Opec will have to drive the oil price up in order to regain losses.

The U.S. was supposed to be the world’s new swing oil producer, able to nimbly open and close the taps in response to market forces, thanks to its bounty of shale fields.” In the past a barrel of oil has been one hundred dollars, recently it has dropped to thirty dollars. Though some wells can be profitable at low prices it puts a serious strain on the oil industry as explained in this article.

The global price of oil has stooped to dramatically low prices as the demand for oil has died and oil companies are trying to get the demand for oil to raise and stimulate the oil trade. If the oil trade gets stimulated then the price of oil will rise making the supply higher than the demand and making more money for oil

drop in oil prices in the global market has directly affected the energy sectors and highly influenced

Until the above said period, the OPEC countries were the main producers of the natural oil and they worked as the cartel and they determined the quantity to be produced based on the market demand and they kept the price at a higher rate and prevented the fall of the price by reducing the production of oil. The introduction of the shale oil made the problem. The higher demand and lower supply of

In 2014 the Organization of Petroleum Exporting Countries, or OPEC decided to lower the oil price. The reason the OPEC nations decided to overproduce and flood the market was to strangle the oil industry of the United States. This low price would force the oil businesses to lower their prices to compete and therefore income would be reduced. The OPEC nations would have a majority of control over the oil market if the US oil industry fades or is driven out of business. The OPEC nations, whose primary income is from petroleum, are fighting for more income from the US based

Crude Oil prices commonly fluctuate. Similar to other commodities in the market, the interactions between supply and demand play significant roles in determining the price of oil. Both oil producers and consumers depend on the prevailing prices to functions precisely as indicators as they work to adjust their supply as well as consumption. Since oil remains the only commodity that is widely-traded, any fluctuation in its prices results in profound effects on national economies. Just to be safe from the implications of these fluctuations, most businesses utilize the future market to protect against the shifts in the oil prices. In this paper, the underlying dynamics of both supply and demand and their consequent impacts on oil prices as well as what the implications mean to the global economy will be addressed.

Unexpected cuts in supply has also been a contributing factor to the oil market, issues such as Chevron closing of offshore oil refineries due to terrorist activity, civil unrest in Venezuela, and lastly wildfires in Canada, has had a negative impact on oil production.

There are two main reasons for falling oil prices - weak demand in many countries due to unexciting economic growth coupled with flowing US production.

Internationally, the supply of crude oil has been elevated beyond demand leading to a subsequent decrease in prices for the past few years. The price reduction of oil remained consistent and very low until a few months ago when the oil market underwent scrutiny for its high level of output. Since then, the price of oil has been extremely turbulent; experiencing record highs for the year, but following with plummeting values the very next day. Many factors, internal and external to the United States, account for the change in supply and demand of oil internationally and these factors will subsequently cause the price of oil to decrease to 48 dollars from 50.

The price of crude in global market is essentially driven by supply and demand. The various method developed by IMF, World Bank(WB) and OECD have estimated that 10-dollar increase in crude oil prices would lead to a decline of world production of goods and services by 0.5%. The world economic growth and world oil demand are moving in tandem and there is high correlation between world economic growth and demand for oil. Hamilton (1983) reported clear evidence of nonlinearity-oil