Sunday, April 11, 2010
Oil Prices Find a Sweet Spot for World Economy
This article discusses the trend in oil prices over the past year and a half, and as the article puts it remarkably, "they have barely budged." Oil prices have stayed very stable between $70 and $83 and this is allowing consumers to feel much more confident. No longer do the average people in America have to devote such a large portion of their income to keeping their automobiles running. Another beneficial aspect of this steady oil price is what it is doing for manufacturing and transportation businesses. A large percentage of manufacturing products are shipped by truck, and with oil prices at $147 two summers ago this because a huge cost of production. Hopefully oil prices can stay under $100 dollars for at least a few more quarters as our economy slowly makes its recovery.
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I think one of the reasons behind the stable and relatively low oil prices is that most economies over the world are still in the process of recovering. There are not as many economic activities now compared to before the recession took place, resulting in weak demand for many oil-related products and hence the weak demand for oil. It is most likely that the oil prices will remain stable for a while, at least until the economy has fully recovered.
ReplyDeleteThat is a very likely possibility. The world as a whole has definately not been producing as much in the recent quarters which would definately have an impact on the price of oil.
ReplyDeleteIt's good that oil prices are stable in the short run, but when looking at the long run picture, our dependence could be our downfall. American auto makers were used to steady, low prices for gasoline and therefore, a high demand for SUVs. That compliance resulted in the use of tax payer money to bail them out. Adaptation is necessary in business, and companies need to keep that in mind.
ReplyDeleteRise of oil price has historically been related to economic down fall. 1970's,80's, and 2008's are few of the exmaples. With the rising oil price this might be an indication of upcoming inflation as many economists have predicted.
ReplyDeleteThe steadiness of the oil prices could indirectly lead to some problems. The steadiness of oil prices could lead people think that they will remain this way and the demand for less fuel-efficient cars could increase. If this were to happen the demand for oil would increase as the supply decreases consistently which would bring the prices higher than the ideal ones.
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