Why is the price of oil going down?

Don’t tell me it is because we e driving less. Big, but miniscule compared to overall world consumption.One excuse is the stockpile of oil has become big but I do not believe the production rate has suddenly changed and pushed the storage tanks full. Explanation, please.

3 Responses to “Why is the price of oil going down?”

  1. Jeffrey S Says:

    When you see the price of a commodity rise as much and as fast as oil has over the last several years, it is almost certainly because of speculation. Just as people can buy stocks in a company, speculating that that stock will go up, they can speculate on oil futures. The price of oil can therefore be affected by factors other than supply and demand. The proof that much of the high price of oil is due to speculation is that the price has fallen precipitously in recent weeks in concert with the stock market. If if were merely supply and demand, you would not have seen that kind of thing.

    Speculation can cause almost any commodity to rise in price beyond any reasonable measure of its intrinsic value. But just as those prices can rise rapidly, they can fall rapidly, too, as the speculation bubble bursts. We saw this in the bursting of the recent housing bubble, or the dot.com bubble of some years ago. You can see this kind of thing going back at least to the 17th Century, when people in Europe went crazy speculating on the price of tulip bulbs (I’m not kidding here), an "exotic" new flower that had recently been introduced to Europe.

    The point is that the oil price bubble has burst, and although the price of oil is probably too low right now, based on world supply and demand, it will probably stabilize at about $70 or $80 a barrel, well below the price of about $140 a barrel it was at just a short time ago.

  2. Harold H Says:

    last year we saw exactly the same thing happen around the holiday season to boost the economy, and immediately after the season was over prices went back up.

  3. Mary Ann Says:

    Hello Syrious,

    Businessmen in the middle east:Arabs, Europeans, Americans, Asians and are not really earning when oil prices goes up, because they also have to pay taxes and all other government dues, as the prices goes up, dues also increases, less income for the companies. So they are better off if the prices of oil are regulated to its normal price.

    Another reason is the invention of bio fuels, there are lots already.
    In my country we are using them, testing and hoping to cut
    on expenses.

    Sincerely,
    Mary Ann