Article:
The perception that oil supply cannot keep up with demand has fuelled another jump in prices around the world.
London Brent crude rose another 59 cents a barrel to $37.95, while US crude futures hit $40.92, close to their all-time high of $41.15.
London Brent crude rose another 59 cents a barrel to $37.95, while US crude futures hit $40.92, close to their all-time high of $41.15.
The trigger was oil cartel Opec, whose president effectively admitted being powerless to cool the market.
A White House spokesman said the Bush Administration was urging oil producers not to act in ways harmful to the US.
Opec cartel president Purnomo Yusgiantoro said member states were already being allowed to produce well over their quotas, but oil prices have not steadied.
Kuwait's energy minister came to the rescue by promising the Gulf state would pump extra oil.
Sheik Ahmed Fahd Al Ahmed said Kuwait would produce up to 2.4 million barrels a day, breaching its Opec quota by 600,000 barrels.
Kuwait's energy minister came to the rescue by promising the Gulf state would pump extra oil.
Sheik Ahmed Fahd Al Ahmed said Kuwait would produce up to 2.4 million barrels a day, breaching its Opec quota by 600,000 barrels.
The International Energy Agency (IEA) said on Wednesday that Opec members were not pumping their full quotas. It identified 2.5 million barrels a day of spare capacity among 10 Opec nations; roughly half of it is in Saudi Arabia.
The current strength in oil prices, which have risen by one-quarter this year alone, is partly to do with old-fashioned supply and demand.
Review:
Review:
The heading of this article highlights it all. It's the change in consumers' expectations regarding the future price of oil that has led to the jump in oil prices. If you can still remember, changes in consumers' expectations is a factor affecting demand. :0
We all know that the price of oil has risen. But what has stimulated it to rise by so much in a short period of time. As seen from “oil price data”, the price of oil has risen from 34 US dollars in January to 40 US dollars in May. A period of just 4 months and oil prices has dramatically increased. I guess this can be explained with the concept of demand and supply. Demand curve shits rightward while the supply curve shifts leftwards. What happens in the end is that the equilibrium price rises. Price would not have risen so much if supply had increased with the increase in demand. In fact, the price would remain relatively stable and not fluctuate like that presented in the oil price data.
Article taken from: http://news.bbc.co.uk/2/hi/business/3707079.stm
Shu Yi
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