Published: September 18, 2015
With the recent turbulence in the stock market few commodities have been spared from losing value. One such commodity is crude oil. Crude oil is notoriously fickle in its nature, but it seems that there has recently been the perfect storm for falling oil prices.
It all seemed to start around October 16, because oil fell below $60 a barrel on all major commodity trading markets, and since then, for the most part, have steadily fell every day. So why have prices been falling so steadily? Well, according to Oil-prices.net says there seems to be a couple specific reasons why oil prices have drastically fell.
The first reason is that Iran has increased their exporting of oil. This was caused by lifting of sanctions by the U.S. after the recent nuclear deal was signed into effect in early April. Iran was eager to jump back into the global oil market so they sold off millions of barrels in reserve. Consequently, they drove the supply up, therefore reducing the price.
Second is that fracking has grown in popularity with big oil companies, and it seems that nothing will deter companies from extracting the oil this way for a long time. In short, hydraulic fracturing, or fracking for short is defined as firing a high pressure water mixture at rocks, usually shale, and therefore allowing oil and natural gas that is trapped in the rock to flow.
A third reason given is that the Organization of Petroleum Exporting Countrie, or OPEC, has done nothing to attempt to raise the price of oil. Historically, OPEC has been able to basically control the price of global oil. OPEC, consisting of 12 countries, contain 81 percent of the global oil reserves. This vast majority allows OPEC to raise or lower the price of oil as they see fit. But they have yet to do anything to thwart this instability and fall in oil prices.
A final reason for this drop in price is that there just is not very much demand for oil anymore. This slump in demand is caused by a couple of factors. For starters, many people drive-fuel efficient cars and have become environmentally conscious.
Keeping in line with environmental consciousness, renewable energy has become very popular in the past few months. John N. Kallianiotis Ph.D. said that “Demand runs the economy, without demand the economy is very weak.” So then what? Well Kallianiotis went on to say, “In this global recession there is no demand for oil. But on the other side there is an excess in production because oil producing countries want revenue.”
So what does all this mean exactly? Well, it means that investors are starting to move away from investing in oil which is hindering oil from recovering. Many investors are moving toward renewable energy plants instead. With renewable energy plants, the price does not rise as the needed resource is used because the needed resource is infinitely abundant. Also the resources needed to run the plant are “zero cost.” This means they do not really pay to import, transport or process any resources, because things like sunlight and wind are everywhere. Jimmy Jencarelli, the head portfolio manager of PRISM, said that “Renewable energy is the way of the future.” Saying that energy stocks are down makes them a much riskier investment in the eyes of people in commodities market. He also said that, strangely enough, the stocks of renewable energy companies actually rise as the oil prices rise due to investors making money off of oil and investing that money into renewable energy.
So you’re probably asking how does all this affect The University. Well, lower crude oil prices means lower refining cost which means lower prices at the pump. Ralf F. Petagna, senior accounting major and president of the business club, said that lower prices really just makes life easier. He saves money on gas when he needs to drive home and he said “Gas prices being low are just beneficial to everyone.” Now, who can argue with that?