How can Oil prices still be increasing?

Question

I dont quite understand why oil prices are continueing to rise because the World is being flooded with surplus amounts of Oil even though India and China's consumption has increased it doesn't in anyway justify the incredible 50%+ rise in a single year. Oil prices were at $70 last year and I would have expected them to increase by about 28.6% to $90 but no more because there is only that single factor of more consumption. The prices have been blown way out of proportion and what possible solutions are left to decrease the prices and allow the global economy to continue propering?

Thank you very much for reading, Im looking forward to your answers.

Answer 1

The real reason why oil prices are rising:

"The problem you had in California was caused by a combination of things: an unwise regulatory scheme, because they didn't really deregulate. Now they're trapped from unwise regulatory schemes, plus not having addressed the supply side of issues

In my opinion, the two biggest factors in oil's high price are the weakness in the US dollar's exchange value and the liquidity that the Federal Reserve is pumping out.



The dollar is weak because of large trade and budget deficits, the closing of which is beyond American political will. As abuse wears out the US dollar's reserve currency role, sellers demand more dollars as a hedge against its declining exchange value and ultimate loss of reserve currency status.

In my opinion, the two biggest factors in oil's high price are the weakness in the US dollar's exchange value and the liquidity that the Federal Reserve is pumping out.

Saudi Oil Minister Ali al-Naimi recently stated, "There is no justification for the current rise in prices." What the minister means is that there are no shortages or supply disruptions. He means no real reasons as distinct from speculative or psychological reasons.

Answer 2

Just because the US markets have been constrained by the rising cost of crude oil, it doesn't mean that the rest of the world isn't buying it.

Answer 3

Let's say a barrel or Oil costs $50.00 USD today in the United States of America and $50.00 EUR today in Europe.

If the USD drops 10% then the new price would be $55.00 USD and $45.00 EUR.

If you live in Europe then you see the Oil prices dropping in value if you live in the United States of America then you see Oil prices rising in value.

After a while the USD drops more and more and you think Oil is rising but Europeans think Oil is dropping.

Here is a graph to help you see things more clearly.

Answer 4

Short  oil and see how smart you really are.

   Buffett says supply is low .

Answer 5

It's not just the oil prices are increasing, but also the value of the American dollar is going down. Think of it like this:

In 1963 (when America still had "hard" money) a quarter could get you a gallon of gasoline and that quarter was made of silver. Quarters arn't made of silver anymore, and a silver quarter from 1963 is worth about 3.50, not much more expensive than gas if you assume that that extra 50-70 cents is caused by inflation. So technically gas hasn't gone up, but the value of our monopoly money has gone down. Think of those pictures from Germany post WWI of people burning their paper money to keep warm because it was so worthless, and maybe that will give you an idea of what the real problem is.

Answer 6

i have heard talk of the government regulating the oil commodity trade.  it's definitely out of hand, and based on speculation.

Answer 7

Because there are about seven people in the world who can wake up any morning and say: " I theeenk I weeell charge those neeet-weeets a leetle more today... "  and they DO !

.... why not get $ 140. for something that you made a fabulous living on when it was only $55. ?   Raise, raise, raise ..'til the fools use a little less...then bring it down a little....if they use more  WHAMMO...jack it up again ! GOTCHA !

.... and WE will always be the " bad guy"...because the only thing we can raise is the price of " foodstuffs"...WHAT !!! ARE YOU TRYING TO KILL POOR PEOPLE !!! ???

Answer 8

Neither actual demand has increased so much nor actual supply has decreased so much. Even then prices rise because of speculation or  by stocking. This works as follows. Suppose businessmen, trader, stockist, speculators are of opinion that prices of a commodity will increase and commodity is a essential commodity that consumer will be compelled to buy at any rate. then they book the stocks of commodity by buying Oil Futures at exchanges. Seeing to the trend more and more people come forward to buy at further higher rate and prices goes on increasing.

possible solutions are :

Some major country releases buffer stock in one day then price will fall in one day.

Stop commodity trading in Oil futures and make actual delivery compulsory, then few traders will book oil stock.

Regulate the oil stocking capacities of stockist.

All the aggrieved people resolve to use less and less oil fuels despite all difficulties. When there will be few buyers then speculators will bow down.

Individuals as well as governments has to take initiative.