Monday, December 1, 2014

International Oil Price Tumbled, What to Do?

Personally, I don't get it. By common sense, oil is non-renewable energy resource, hence this resource should be facing scarcity. Therefore, the supply should be reducing.

Based on economy model, the price should increase when supply is reducing or demand is increasing. But, why on Earth does the oil price reduce while supply is reducing? Why? Why?

Why is the oil price tumbled?
Based on what I understand, the oil price dropped is because the supply of oil is increasing faster than the demand increase for this moment. And, OPEC refused to cut the oil supply to maintain the price. So, for this moment, supply is more than demand, hence price drop.

That sounds logic, but only for this moment. We all know that so far, oil acting as the main source of fuel, an energy for most of the transportation, and certain industry. And so far, there's no replacement that can take over the oil's position. What makes the oil plunged so seriously?

Welcome to capitalism world
Yes, this is how capitalism influence this kind of drop. Even analysts claim that the price could drop even further. But, take a step back, we know this is a temporarily drop. And this drop is illogical, because in long term, we know oil is still going to be used up if there's no new oil resource discovered.

For the moment, oil is oversupplied. But, in long term, this is not the case. People who trades oil are trading for short term. They see and earn short term money. In long term, no way. Supply is going to deplete, and demand is catching up with increasing population.

Are you convinced with the "oversupply" of oil? What do you think this will last?

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