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Oil Prices at $50 Per Barrel!

Tuesday, December 16, 2008

In 1999, the price of oil hovered around $16 a barrel. In July 2008, it reached a peak of $147 a barrel. In the months that followed, as fears of a global recession grew, prices plunged to the $75 a barrel range, a roller coaster ride that left both producers and consumers confused and wrung out. Prices were still far higher than they had been a few years earlier, but oil-producing countries that had reshaped their economies around the huge influx of revenues faced a suddenly altered landscape.

Many factors contributed to the long buildup between 1999 and 2008, including the relentless growth of the economies of China and India and widespread instability in oil-producing regions, including Iraq and Nigeria’s delta region. The triple-digit oil prices that followed appeared to redraw the economic and political map of the world, challenging some old notions of power. Oil-rich nations made enjoying historic gains and opportunities, while major importers – including China and India, home to a third of the world’s population – confronted rising economic and social costs.


Countries like Russia, Venezuela and Iran that were flush with rising oil revenue saw that change reflected in newly aggressive foreign policies. But some unexpected countries reaped benefits, as well as costs, from higher prices. Consider Germany. Although it imports virtually all its oil, it has prospered from extensive trade with a booming Russia and the Middle East. German exports to Russia grew 128 percent from 2001 to 2006.

The surge in prices hit automakers hard, as sales of the truck-based models that had been Detroit’s most profitable product dropped sharply. Mass transit systems across the country reported a sharp increase in riders. As prices fell in the fall, the question facing OPEC and car makers alike was whether those shifts would reverse, as they had in previous downturns, or whether a tipping point had been reached.

The rise of oil prices for just a few months has taught us several lessons. The pressing need for research into alternative energy, or the renewable and clean energy technology was felt like never before in these few months of oil price hike. I believe there are two main reasons for venturing into energy technology. One, for global warming; And two, for curbing down the petro-dictatorships.

The factor of petro-dictatorships has been understood like never before to many. It is a matter of concern that most of the OPEC countries are totalitarian regimes. It was only when the oil prices were nearing its peak, Russia attacked Georgia. It was only when the oil prices were high; Iran went on making many statements against US and Israel, to the extent of calling them as “Zionist conspiracy”! The superstitious attitude of the Third World and especially from a country which is in the world of conspiracy theories was at display to the world. Iran was gathering support from people the world over for its ability to poke America and other strong nations with a stick, though for no real reason. The country is now sleepless with $46 per barrel oil, with unemployment at 12.5%, a notable shortage of skilled labour and 25% inflation! After the birth of renewable energy, it will be no wonder if the world comes up with a statement calling Iran’s monarchy as “Satan”. Despite all the figures of unemployment and inflation, who cares for the public? As far as Ahmadijenad and his monarchial associates are happy, Iran is a happy country for them.

Please note it’s the Monarchy in Iran responsible for the situation in which it is today, not the people as even they themselves are helpless. Citizens there did have a protest many times demanding democracy and the marches included women too.

As the oil prices now fall down, the Civil War in Iraq has stopped, as reportedly the Iran funding is reduced. Much of the oil money that goes into these totalitarian regimes, especially like Saudi Arabia and Venezuela, stops the need for change there. As alternative sources come up and the need for oil is reduced, these countries will feel a need to drill in the energies of the people instead of drilling more oil wells. It was only when Bahrain’s oil reserves depleted, the need for changes was felt. Today, woman candidates can have a say in politics there and also vote. All this, because of the end of oil money. There is a threat to human freedom and democracy when more money stocks with the oil producers.

Finally, what speculation can now be made regarding the future oil prices? Considering the current trend, analysts point to $0 by Christmas 25 December or at the most by 31st! There has been a supply cut last week from OPEC, a move made to boost up the oil prices. Even this move did not stop prices from falling, and I wonder whether we will get to see prices at $30-$39 range!

6 Comments leave one →
  1. Nimmy permalink
    Wednesday, December 17, 2008 3:00 pm

    Well articulated and informative post…

    well,if oil price falls too low,many expats in middle east will lsoe job..If they lose job,they will come back to india and our nation will be flooded with manpower,who don’t know what to do next..hmm..indeed complicated scenario…

  2. Nimmy permalink
    Wednesday, December 17, 2008 4:45 pm


  3. Saturday, December 20, 2008 8:02 am

    Very informative! There was a recent news about the fall in prices here in Bangalore. I don’t know how long it’ll take to implement…

  4. Sunday, December 21, 2008 9:33 pm

    Wow! Hope the fall in prices get everywhere. The profits from petrol prices to be invested into research in energy technology is not possible in India! 😛
    It’s best that the prices remain low.


  1. Environment and nature » Blog Archive » Oil Prices at $50 Per Barrel!
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