What are the real reasons for the high rocketing prices of oil?

Question

What are the real reasons for the high rocketing prices of oil?

Answer 1

If your talking about the united states its because of our president and vice...there as said in bed with the oil company..

There many other reason also...The future markets..in which people bid up the price of oil...We need a barrel of oil to drop maybe back under 100 and then the people betting on it to keep moving up will lose there money...and it serves them right for being so greedy..

Answer 2

The price of oil started to go up drastically very soon after the US government cut the interest rates and the US dollar went down relative to other currencies.

When the interest rate is less than the inflation rate.  Then it doesn't make sense for oil-producing countries to pump too much oil in exchange for US dollars.  Because their oil in the ground will not loose value even if they keep it there for 10 years.  But if they sell that oil in exchange for US dollars.  Then their US dollars will keep loosing value due to inflation.  And over 10 years such losses can be quite substantial.

Some oil producing countries probably cut back on production of oil in order to avoid having too many US dollars which are constantly loosing value due to inflation.

If the US government raises the interest rates well above the inflation rate.  Then the price of oil will probably fall down because US dollars will become attractive again.

The only problem with raising the interest rates is that a lot of homeowners and banks are in financial trouble now.  And many of them would go bankrupt if the interest rates go up.

Answer 3

There are several reasons:

1.  Supply and Demand - supply is tight, there is little spare capacity in the world, and demand in emerging economies is growing strongly -- or at least it was recently, all bets are off in the current quarter.  

2.  Low Capital Reinvestment Rates:  Consider the fact that new supply is restricted because of the limited quantity of drilling rigs and skilled workers to staff them, and the lack of access (foreign and domestic) to many of the most prospective locations in the world to explore for new supply.  While the oil companies have capital to invest, they dont have enough good opportunities, manpower, or equipment, to efficiently spend all that capital -- check out the fat dividend rates paid back to shareholders.  Also consider that much of the oil profits goes to foreign governments, and they re-invest a lot of their profits in social programs, not in finding and developing new production.

3.  Speculation -- caused by market uncertainty, but motivated by two human emotions -- fear and greed.

4.  Uncertainty (Nigeria, Venezuela, tensions in Iraq / Iran / Israel), the possibility of hurricanes, and anything else that has the possibility of disrupting supply.  There is no good news here, just about anything that happens internationally adds risk, feeds speculation and makes the price go up.

5.  Currency fluctuations -- The decline of the dollar certainly has some affect, but I'm not sure how much.  Aren't many of the middle eastern currencies pegged to the dollar, just like that of China?

6.  The very inelastic nature of the demand curve.  Gasoline is in many cases a necessity, consumers must have it regardless of the price because they cannot quickly switch to something else.  If demand increases from the current ~86 million barrels of oil per day to 88 million BOPD, the price shoots up to approx $200 per barrel.  If demand drops to 84 million BOPD, the price drops to approx $50 per barrel.  From high to low, that 5% swing in demand can drive a quadrupling in price.

Answer 4

The following have influenced the value of the price of oil:

1. Weakening purchase power of the dollar. (this is #1)

2. Supply & demand from other increasingly industrialized countries. (This is #2)

Regional prices differ.

1. Gasoline has state and local taxes tacked on.

2. Some places like California prescribe different formulas and additives.

3. Some places are farther away from distribution channels (plays a role but minor)

Answer 5

High demand for oil has caused oil to become expensive and go up.  There is very big demand for that, especially in other nations.

Speculation plays a role.  Its not the main one.  But it does play a role because investors bought oil futures..and that contributed to prices heading increased ( more demand means more expensive).

Inflation plays a role too.  Our dollar has lost much value.  So oil becomes pretty expensive.

I heard that countries have restricted oil production (some countr ies).  So that has contributed to prices heading up.

I think the war in Iraq and some tension have contributed to higher oil prices.  Its not a main reason.  However, it is a reason.  Yes, if we go against Iran in a war, gas prices will go up very high.

Answer 6

Manipulation for profit . An the devaluing of the dollar 60% sense 2004