Question on falling oil prices

[austy]

Could someone please tell me why oil prices have dropped over the past year? I know that the conflict in the Middle East is probably a factor, as ISIS have taken over many oil generating facilities. And I'm assuming that the decreased economic growth in China may also be a factor, as they now require less resources. Is what I said right and also, what are the other reasons?

[.letmeinplz//]

Need help with your homework huh?

[Schwarzschild]

Hi,

 

I can give you some quick insight on the reason why the oil prices fell the way it did. There are many reasons for this happening, so bare with me please.

 

It all started with Russia invading Ukraine last year. That event triggered panic to the global market, making oil increase in price (due to fear that global supply will shrink - since Russia is a producer) and the US dollar appreciating in value (due to panic from investors - dollar brings safety). That made the price of oil reach somewhere around $107 per barrel.

 

For pure geopolitical reasons and to hurt/punish the Russian economy, US started to use it's "fracking" tech to pump oil into the global supply market. That with Saudi Arabia (biggest OPEC producer) also increasing supply to not lose market share (they are also allies with the US), made the oil supply on the global scale to become a glut (surpus) that the world slugish economy could not consume. At the same time, the US dollar was appreciating in value making it even more expensive for consumers, thus hitting oil price even harder. Market speculators joined in (shorting oil) when they sensed a trend was forming making the price hit a low of $44 per barrel.

 

The plan succeded since the Russian economy suffered harshly (the rouble collapsed; inflation hit 16% and GDP growth was negative). The Russians need the oil to stay at a minimum of $100 per barrel to make money from it (extracting it from Siberia is very expensive).

 

 

 

Hope this helps and sorry for the late response (I'm new here lol).