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Top Most Reasons Behind Worldwide Tumbling Oil Prices



From almost a year we have been observing falling and lowering oil prices all around the world. This sudden fall in prices is just not something casual. There are a lot of reasons and issues pertaining behind such a great fall of prices of all the times. Is it just that simple rule of economics that the demand has been reduced? Is reducing the demand that easy all around the world? Is every country already sufficient of the oil demands they had from years, even after the increase in number of vehicles depending on oil in each country? You must be wondering with the similar kind of questions revolving in your mind. Every person in the world associated any way with the oil and its prices is actually curious to know more deeply what actually happened, leading such low costs of oil all over the world.

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Oil prices were cut sharply to the half in June 2014, they managed to plunge a bit high but have fallen again few weeks earlier. Thousands of jobs have been lost and many of the businesses have to reduce their oil exploration and production activities. This has been a massive change in the world and has affected many on its way. All the answers lie in some of the simple rules of demand and supply we have been studying as basics of economics. The overall situation began changing when USA started becoming self-sufficient in its oil demands and the exporters like Saudi Arabia, Algeria and Nigeria have to look for new markets and export destinations. They have to work really hard to get new markets in Asia and the reasons why they have to reduce their prices is actually that entering a new market with such high prices would have never been affordable for them. On the other hand countries like Canada, Iran and even Russia are emerging as new strong competitors for those traditional and old oil exporters.

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Even the demanding countries have also been facing many difficulties, like China who is the World’s biggest oil importer have been going through the worst phase of devaluation of their currency. This might also be one of the reasons behind fall in the demand of oil. Along with that people are becoming more energy efficient and preferring vehicles less oil consuming and environment friendly. Whatever the reasons may be behind all this, the major beneficiaries are obviously the households and daily oil and petroleum users. Earlier people had to spend a great portion of their incomes in expenses of oil and petrol now they will be have to spend smaller portions of incomes on them. People falling in lower income and wage group are the ones which will get the most of the benefits. On the other losing end there will be the companies who just started their oil exploration and similar petroleum related business along with all those oil exporting countries and nations. They will be facing a real decline in their exports which will ultimately bring down their economies and they will have to deal with real and severe issues of unemployment and unbalanced international trades.

Where is OPEC busy while all this is happening around the world? Countries like Iran, Algeria and Venezuela have been pressurising to cut down the levels of production so that the supply can be shortened and then the prices can be set at some reasonable levels. All this is not happening because the major oil producers like Saudi Arabia and UAE have not been willing to do so. They do not want to cut their levels of production at any cost. Saudis have been saying that they will never do so because it will cut their share in the market and the competitors will be benefiting from this, they do not want to lose their market share. They claim that they have no issues in oil prices going much lower than they are right now. The speculations are that if the prices will remain lowering at this level, it will be hard for Saudis in convincing other countries and OPEC to keep lowering them because the others have to face some serious financial constraints because of Saudi Arabia’s such stubbornness. Even though until now they will be facing like $300 billion loss in their earnings because of this issue.

There is a small whisper around the world that this may be the conspiracy of Saudi Arabia and USA to bring down the competing countries like Iran and Russia. But there are no solid proofs for such whispers to be proved as right. Oil prices have a history of following really sharp booms and bumps at the same time so it will be recovering soon in future and will again reach the top. Whatever may be the reasons, oil producers will never accept their defeat and will continue fighting these crucial times and will surely get out of it soon.



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