Oil and gas prices continue to increase rapidly in most areas of the world, with no relief in sight anytime soon. The global economy has reached a point where the demand for these products continues to increase, while the supply keeps dropping as production decreases worldwide. This article will attempt to explain what caused this sudden change in prices, as well as what can be done to help stabilise them in the future.
Increased demand from Asia
Many experts point to increased demand from China, India, South Korea, and Japan as a key driver of rising oil prices. Most projections show that demand for oil will continue to grow in Asia as emerging markets like China continue to develop at a rapid pace. As these economies become larger—and wealthier—the amount of resources they consume increases. More cars on roads mean more gas guzzled, which means higher prices at your local station down the road. If you live in an area that gets its energy from foreign sources (not just oil but natural gas too), you’re especially vulnerable to price fluctuations because these countries can enact embargoes or threaten military action if we don’t do what they want on any given issue.
Decreasing supply from OPEC countries
While oil and gas prices have increased, demand is also high. The only way to balance these two factors is for a decrease in supply—and that’s exactly what OPEC countries did. Back in 2014, OPEC countries, such as Saudi Arabia and Iraq, began cutting back on production to boost prices. These countries hope that by limiting supply they will be able to drive up prices since it will be harder for new companies to fill in those gaps; however, their plan may not work as well as they’d hoped. Already there are stories of energy shortages in parts of Asia where demand is especially high due to continued economic growth in China and India. If low levels of supply continue throughout 2016, prices could rise even further over time.
The United States imposed sanctions on Iran’s energy, port and shipping sectors in early November. The sanctions are a response to Iran’s nuclear activities, which Western nations fear are geared toward producing a nuclear weapon. As such, oil markets have taken notice of a possible disruption in oil exports from Iran, which amounts to about 2.5 million barrels per day or 5 percent of global production. If Iran reduces its export by even 1 million barrels per day due to these sanctions—as some analysts believe will happen—the price of crude will likely increase by $10-15 per barrel. For example, between Nov 12-16th crude oil rose from $79.33/barrel to $86.62/barrel as international tensions over Iran were elevated
US Mid-Term Elections Results
If you’re unfamiliar with them, mid-term elections are held every two years to fill positions in federal, state, and local governments. Typically not as controversial as presidential elections, these types of elections have recently drawn a great deal of media attention because of a campaign that focused on topics such as immigration reform and relations with Russia. The results from these midterm elections will have significant consequences for politics over the next two years. In light of all that’s been going on, it’s worth considering how you might vote differently or whether you would change anything about your lifestyle during an election year. Midterms likely won’t get as much attention in future years, but they definitely deserve our attention now.