In the past, military conflicts in the Middle East and the attendant threat of supply disruptions would send global oil prices soaring.[1]Right now, it’s an really abnormal phenomenon that oil prices slump regardless of the conflicts in the world’s most important oil producing region[1]. After reading a reference article, I’d like to explain it by applying what I have learned in class.
To kick off, the oil production from Bakken and the Eagle Ford in the U.S. is pretty fruitful. Abundant of oil supplies from these two areas release the world from a shortage of oil. In addition to that, the consumption of oil is falling all over the world. Not only because of the economic rescission but also the threat from its substitution-coal. Coal prices decrease to half of what they were two years ago, which drag consumers away from oil. With lower demand and excess supply , oil prices drop inevitably.
So, some suppliers are storing oil in bing tanks for future selling. The implication is that they are pretty sure that the lower oil price is temporary, in the long run it will rise again. But to my consideration, with the new energy technology increasingly developing and spreading, as well as public’s awareness of green economy enhancing, prices of non-renewable energy falling will be a trend. We don’t exclude the possibility that prices of oil may rise slightly, but unfortunately the profit won’t compensate the expenditure of storing.
reference list:
1.Jaff,Rubin,”Why oil prices are dropping despite Mideast unrest.“Sep. 22 2014, 7:49 AMEDT,<http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/why-oil-prices-are-dropping-despite-mideast-unrest/article20717966/>
2.Shawn maccarthy,Jeff Lewis,“Oil overflow:as prices slump,producers grape with a new reality“ Sep. 27 2014, 5:00 AM EDT,<http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/oil-overflow-as-prices-slump-producers-grapple-with-a-new-reality/article20815601/>