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Global Oil Price Market
Transcript of Global Oil Price Market
Global Oil Price Market
Background to Oil Price from 2008
graph to right shows that since 08 global price has risen
Effect on UK price
crude oil costs and renewable energy demand
increasing scarcity of crude oil will increase price dramatically this is starting to make crude oil to go from inelastic to elastic
as personal incomes are stretched demand are likely to move in favour of better value for money renewable energies, decreasing the use of crude oil as a domestic energy source
germany is leading the way in Europe presently as Eurozone crisis worsens and price of crude oil increases more nations will need to follow Germany's example
sourced from: http://www.economicsonline.co.uk/Competitive_markets/The_market_for_oil.html
while consumers are finding fuel price hard to meet in 13 price has dropped
the price of oil was $147 per barrel July
the recession caused oil price to fall by 76% to $34 a barrel
(income effect), and substitutes began to emerge.
demand for oil rose. so oil prices rose again. Shifting the demand curve from d1 back to d2
oil was trading around about $125 a barrel. And increase of 73% from
Peoples disposal income increased, due to increase spending confidence in the global market derived from low prices in oil, creating more business for companies to then increase wages, and support increasing business performance, increasing price of oil.
UK price trends: consistently increasing price of petrol over past 22 years,
slight dips in price occurring since 99 every 3-4 years.
this shows that petrol pump prices in the UK are due to experience a dip in the “foreseeable future”
reason for is current 3-4 year time period price soared, and graph shows trend is when this happens a dip follows.
The effects of the global downturn On oil
new technology enabling more efficient use of oil, requiring less demand
substitute raw materials, i.e h20, hybrid technology, Nuclear Power, bio fuel,
overall demand will decrease. As price continues to rise due to scarcity of oil,
supply will diminish as substitute goods takeover.
'The new oil reserves we’re now exploiting are not only more expensive to develop, but they also take much longer between the time the first well is drilled and the when the first oil is produced. That means it takes longer for oil supply to respond to changes in price.'
If this is the case, the main reason for increased oil price is the fact companies that produce it arnt making enough return after costs have been deducted. so prices have to rise to meet the cost overtime, as oil is taking longer to produce/ manufacture, the sales revenue takes longer to come in. 'Money coming in taking longer than money going out'.
5.3.2 Characteristics of a declining economy
In a declining economy, the feedback loops described in Section 5.3.1 can be expected to work in the opposite direction, because instead of rising wages increasing demand, the situation becomes a situation of lower total wages decreasing demand (because with less energy, fewer goods and services can be produced, so less wages are paid in total).
With less demand, property values tend to fall, and layoffs become more common. For reasons described in Section 5.2, lenders become much less willing to lend money for new investments. Furthermore, with depressed prices because of low demand, there may be little money from cash flow for new investments, so new investment may become difficult.
The amount of money consumers are able to spend is likely to fall below what their salaries would suggest, because of reduced debt availability, declining stock market prices, and lower home prices.
All of these downward forces tend to accelerate the economic decline, if one has been started by an external force. Thus, once economic decline has started, it may be difficult to stop. Investment in new plant and equipment may be a particular problem if a business owner is required to pay off old debt and cannot arrange new debt.