Mankind Essay, Research Paper
The oil industries have been a major issue in the world market economy; it has been a distressing factor for many years. In the 1970 s members of the Organization of Petroleum Exporting Countries (OPEC) decided to raise the world price of oil in order to increase their incomes. Recently oil prices in various energy goods like gasoline, diesel fuel, and heating oil have boosted tremendously throughout the country. OPEC is responsible for regulating production quotas, but still the production rate increases.
There are some factors that drive the energy prices to increase such as supply and demand. Many people demand a high volume of oil within the United States, but that s a problem since inventory levels are low. As an immediate consequence oil prices rise and this causes the consumer consumption level to decline. In the past weeks oil inventories have decreased, their level has gone down twenty percent from where it stood a year ago. With summer driving season coming to an end, and take the pressure off the gasoline producers. This allows the inventory level to increase and price reduction.
OPEC President Ali Rodriguez said rising oil inventories could lead to a drop in prices next year, and cautioned against large increases in output, El Universal newspaper reported. Rodriguez also said world oil inventories now stand at about eighty days, and could rise to eighty-seven days within a short time. OPEC has an informal agreement to raise output by five hundred thousand barrels a day, or two percent, if the group s oil benchmark holds twenty-eight dollars for twenty consecutive days.
Speculation is another factor that fluctuates prices because the diesel demand rises in the fall season due to holiday, and harvesting seasons since this is the time of the year when shipping and handling takes place the most. Coming right next to it is the heating season in the wintertime, which uses a high level of natural gas. Expectations that OPEC will raise output at it s September ten meeting were bolstered by comments from OPEC Secretary General Rilwanu Lulkman, who told Germany s Der Spiegel magazine the group would boost production if prices remain at current levels.
High oil prices are the result of market speculation, high taxes in consuming countries and refinery problems, as well as strong demand amid growing economies, Rodriguez said, according to the report. We have to focus on inventories because experience has taught us that it stocks rise above eighty-two days of supply it will cause a price fall, because speculators are watching these supplies just as closely as we are, he was quoted as saying. A decision to raise output may be triggered by OPEC s price mechanism, an informal agreement to raise output quotas by five hundred thousand barrels a day, if it s price benchmark stays above twenty-eight dollars a barrel for twenty consecutive trading days.
Natural disasters such as hurricanes play a big role in the production level. Analysts fear that such disasters might have a negative impact on the economy. Places like the Caribbean, and Gulf Coast whenever they face the hurricane season have decreased the production of oil in previous years. This is important to the consumers since there s places in the Caribbean like St. Croix Island that produces five hundred thousand barrels of petroleum each day.
Middle East changes in production of oil are the primary source of economic fluctuations. When political conflicts with other countries occur the supply of crude oil that these countries provide clearly reduces and the price of oil rises throughout the world. In the United States producers of gasoline tires and many other products experiment higher costs. The result is a leftward shift in the aggregate-supply curve, which in turn leads to stagflation. Fortunately our country is not facing these sort of problems, if this were a problem the consumer would suffer the consequences by paying high prices on oil products.
The Organization of Petroleum Exporting Countries at a meeting scheduled for Sunday will take steps to stabilize crude oil prices, the group s president said, indicating members plan to increase production We will not only see a declaration but also the action necessary to stabilize the market, Ali Rodriguez, OPEC president and Venezuela s oil minister, told reporters at a news conference in Oslo that Olav Akselsen, Norway s oil minister, also attended. OPEC member, under pressure to increase output as oil prices are fifty percent higher than a year ago, plan to meet Sunday the tenth in Vienna to review production quotas.
OPEC ally Norway, the world s second-larges oil exporter after Saudi Arabia, won t participate in any output increase because the country is producing at full capacity, Akselsen has said. OPEC has an informal agreement to raise output by five hundred thousand barrels, or two percent, if the groups oil benchmark holds above twenty-eight dollars for twenty consecutive trading days.
In order for it to be a stable price on oil products, us as consumers should regulate our spending in order to have a stable economy. Us as consumers shall follow the factors mentioned in order to keep prices reasonable.