Will oil fall in price during the crisis in the world?
News Exchange. Difficulty in forecasting oil prices due to the fact that the formula for the price of oil of unknown economic and political variables contain much more than famous. But, nevertheless, in turn determining the value of each factor, it is possible to get to the bottom. So what is the price of oil in the world? Will the future growth or she awaits her stunning fall?
Why oil prices may be cheaper?
The experts indicate that in recent years, oil futures market, which formed the price was not the product market, as market expectations, part of the financial market. Determined by fluctuations in volatility in this market is not much, and not just supply and demand, how much free capital, which seeks opportunities for growth:
• inertia weakens. Any economy that requires the support provided by large infusions of futures markets, thus forcing the rise in oil prices. Assurance of a stable demand for oil remains now of inertia, whereas previously this was more serious studies, such as the growth of Chinese economy;
• demand. OPEC and IEA forecasts slower growth in demand for oil in 2011 and 2012 due to the recession of the economy, including China. However, investors in addition to robust U.S. bonds do not mind some risk. As a result, today the oil market is overheated;
• increase self-sufficiency of countries. Arab Revolution, the situation Fukushima show that the effective end of the oil business and the world does not want to be influenced by incidents in other countries. Well it shows the intention of the United States. So the spread between WTI and Brent reached significant values, and the purchase of oil abroad reduced and made more for strategic reserves because of the quality of imported oil than for current needs;
• United States. Oversupply of WTI crude oil in the U.S. has led to a desire to build a pipeline to the coast, where the main oil refinery, and it will be possible to send tankers to Europe. If this goal is reached, the pressure on the price of Brent crude oil will increase;
• reorientation of the global economy. Another reason for the decline in oil prices - the fact that the U.S. and Europe in addition to energy self-sufficiency rate is focusing on alternative energy sources. Thus, Europe is counting on renewable energy, and the U.S. - on its own coal and shale gas, China also hopes to own coal. Also tends to leave the world depending on the motor fuel to electric reseeding. Major automobile corporations are already preparing for it. It is true it will happen immediately, but will occur gradually over 15-20 years;
• the risks of recession. The situation in Libya, where rebels are trying to recapture the state capital - Tripoli, now affect oil prices significantly lower than the likely second wave of the crisis. Fears of a slowdown in global economic growth pushed most of the oil price down. Therefore, the negative political news, along with the same statistical indicators sorely felt by the market.
Can a rise in oil prices?
Global recovery has been slow, and its pre-crisis level of return has no one could. However, oil prices and therefore revenues from its production this year, more than expected in 2008.
This is because crude oil is nowhere cheap. Despite the fact that consumption of developed countries below their pre-crisis value, the growth in demand from developing countries to compensate for it with a vengeance, pushing the price of oil thus up.
According to experts, among the major factors that help to keep oil prices high:
• selling price affects the level of production. Consider a situation that someone starts to sell oil at low prices, for example, $ 30 per barrel - everyone will want to buy this oil, but no one will get it, since the cost of production for most of the deposits is about $ 60 a barrel. Since the fall of 2008, the price of oil fell dramatically, resulting in the world for half a year, production was reduced by half. Thus, the lower the price of oil, the lower production. A decline in production, in turn, reduces the supply, which leads to a decrease in inventory in backup - cheap oil is over, the price starts to rise, stimulating the growth of world output. The higher the price becomes, the more investors are willing to invest in its production because it is profitable;
• oil reserves in the world. Explored reserves are able to ensure peace, according to various estimates, 30-40. But whether all this cheap oil? On the contrary - an easy (and cheap in production), oil is already finished, and so soon have to produce and difficult. And she can lie on the planet in different geographical conditions, at different depths, which would require limiting values for the investments. Only the high price of oil on the world market can force the drill hole to the maximum depth in an incredibly harsh weather and geographic and geological conditions. Therefore the price rise consistently in order to be able to get all the oil - the most difficult available bowels of the earth;
• dependence on the market of suppliers. Most Arab countries with large oil reserves are funded only by oil exports. If you divide the amount of government spending in a country on the number of barrels of oil exported, then we get the minimum price of oil, which satisfied the State. In most cases, it is $ 80 for some of the more than $ 100.
Thus, the price of oil does not depend on the current level of supply / demand and the wishes of the monopoly, supplying oil, as well as from energy companies that will not drill wells on non-profitable price for them.
Current same speculative excesses in the $ 2-3 up and down depending entirely on the mood of market participants. From an economic point of view it is absolutely not essential. But a significant change in prices can cause a budget deficit of export-dependent country in the event of a decrease in oil prices or lead to a change in the orientation of consumers of oil in the direction of other resources - with significant growth rates. The latter fact is obviously not good for the price of oil, and sooner or later lead to the departure of oil from the world energy market, but will it not soon.
That said, though the probability of falling oil prices remain relatively high, if oil is not maintained continuous growth in demand and investment capital, which is more in gold and treasury bonds. Factors contributing to the growth and stabilization have exhausted themselves, so this year may drop the price to $ 80 per barrel.
Possible liquidity injections, which at the request of Fed Chairman Ben Bernanke may yet happen, are able to support some time prices from falling. Therefore, it is not clear whether the price will fall sharply or slowly descend. Precise answer to this question will be September 21-22, after a special meeting of the Fed.
