When there is an increased production of OIl, world wide why oil prices are soaring?Is it man made?

Question

The Saudis have announced enhanced production of oil. There is no shortage of oil world wide, but the Internayional prices have crosse USD.140.00/barrel. This does not satisfy the demand supply theory, then is it man made?Or is the cartel responsible for this situation? What are Indian Govt.'s effots for more oil exploration in India?

Answer 1

Supply and demand is a very sensitive system that can raise prices or lower prices dramatically, in most cases. But I dont believe supply and demand is the reason behind the high prices of oil. If you look, I have yet to see any place saying they are running low on oil. Very few countries are rationing oil, and the only ones that are arent because of supply and demand. Take Iran for example, when they rationed oil. It was basically to curve the over-use of oil. Not because supply was running low. I believe that oil prices are high because of speculation. Its the only real thing that makes sense. The way the American market works is prices fluctuate all the time. All it takes is one person with credibility to say that he believes, for example, "the housing market crash will effect the oil market". How, i havent the slightest idea. But, they did and it raised oil prices. It takes opinion (speculation) not fact, to raise prices on necessities in the US.

The strength of a company in the US is measured on people's opinion of how well that company is doing. Take Apple for example. People thought they were going under with their announcement to increase production more on ipods than in computers (couple of years ago). Apples stock price fell. But it wound up being the best move Apple could have made. Now their stock is soaring. The same principal with oil. People think the dollar is weak and there are fears because of speculators. So, the price of oil jumps up in those fears (seeing as necessity items raise when people think bad things, luxury items get cheaper).

Answer 2

This is how oligopoly operates. It is definitely man made.

Answer 3

Actually it is supply and demand: one of the most critical factors of supply in a market of any non-sustainable commidity is the good old determinant of future expectations:

If geologists expect there to be a gradual decline in oil production or their predictions are unable to keep pace with those that economists make of increasing demand (especially China and India), then supply will most likely decrease for future reserves causing an increase in prices. Speculators are actually doing us a favor (trust me, Ive been studying to be one for three years now).

Let's keep things simple though for YA: global demand is expected to increase while global supply is expected AT MOST to increase at a decreasing pace, so relatively speaking, if demand stayed the same, supply would decrease in a sense. The demand for oil in the US isn't likely to decrease or even remain level over the next decade or so, even if we do find alternatives- it comes with growth.

But besides S & D, you also have to factor in the decline in the US Dollar: If one Euro = $1.35 one year ago, and $0.15 more today, would you rather get paid in Euros or US Dollars? Well if they didn't offer you a pay raise of at least $0.15 by choosing American, you would obviousely choose the Euro. Now pretend your labour is selling oil to Americans.

There are also other things like violence and taxes- every time Omert and Achmenidijahd exchange threats, all of the acturaries and market analysts hint an even riskier drilling and shipping situation. Then you have China and India's comparative advantage with their cheap exports the list goes on and on.

If you're tired of high gas prices, stop using the internet to complain about them and start using to reduce consumption. And if that doesn't work, then do this: walk however many miles your car uses one gallon for (the m in your mpg), and tell me if that was worth $4.