Why oil cheap

The cost of oil depends on political, economic and other factors. With increased production and overabundance of reserves, the price per barrel is consistently reduced. If there is a general economic and production decline, consumption falls. This has a significant effect on price.

The top oil exporters include the 12 countries that belong to OPEC (an organization of oil exporting countries). This organization stands on the protection of exporting countries: Venezuela, Saudi Arabia, Iran, Iraq, Qatar, the United Arab Emirates, Nigeria, etc. overabundance of products and maintain reasonable prices. Once there is an increase in quotas, the price of oil is almost instantly reduced.

Russia is not part of the OPEC cartel, so oil prices are forming on their own. But the sharp increase in hydrocarbons by non-OPEC countries: Africa, Latin America, leads to an overall decline in the cost of petroleum products.

Domestic political instability in any country that is a major oil exporter leads to a sharp increase in the price of hydrocarbons. Stabilization of the domestic political situation is once again contributing to lower oil prices.

The global global crisis is leading to a general economic downturn. This invariably entails a change in production, consumption of hydrocarbons, accordingly most directly affects prices. Against the background of the crisis, there is overproduction, which in turn leads to an overabundance of stocks. The cost of the barrel is immediately reduced.

Most often, a combination of economic and political causes leads to stable changes in hydrocarbon prices.

In 2012, there is a worldwide decline in production, an overabundance of production and enormous reserves of hydrocarbons, an increase in production quotas by the largest exporting countries. All this inevitably led to lower oil prices.

Leave a Comment