What’s Behind the Falling Oil Prices?

Posted by on December 26, 2014

The oil price is made by a complex combination of factors which influence the price. The overarching factor is of supply and demand; that basic market principle. Due to the economic engine of china slowing down over recent years, demand for oil has decreased massively, with most economists arguing that that decrease in demand is largely responsible for the drop in oil prices. Alternatively, or at least a contributing factor, is the change in strategy within OPEC, with them increasing production of oil to keep the price low.

OPEC is the abbreviation of the Organization of the Petroleum Exporting Countries, which consists of countries from the middle east, with the exception of Venezuela. Saudi Arabia’s oil minister has been on record saying that OPEC is in agreement on oil production policy, and that they will not decrease production in order to keep the prices high. When asked for the reason why, he said “Whether it goes down to $20, $40, $50, $60, it is irrelevant,”, arguing that lower costs means good things for the global economy.

Other people contend that their reason for this policy is less altruistic, and instead is a means through which they can reduce the production in the USA by making the costs of extraction there too high to turn a profit.

Posted in: Economic News