Supply and demand.
by Barbie Kunkelova
Organization of Petroleum Exporting Countries (OPEC) is basically the bodyguard of the oil industry. It ensures the stability of the oil prices in international oil markets. Since the oil sales worldwide are denominated in US dollars, any change in the value of the dollar against other currencies plays a part in OPECâs decision of how much oil to produce. If the dollarâs value decreases, all the OPEC members get smaller revenues for their oil sales in other currencies. After the euro has been introduced to the world in 1999, Iraq was trying to do its business in euros instead of US dollars. Even OPEC as a whole was considering shifting to this more reliable currency. States like Iran and Venezuela changed their oil exchange currency to euro (according to Global Research). December of 2006 was a disaster for the US dollar; it was surpassed by the euro in terms of combined value of cash in circulation (by $42 billion, according to Wikipedia)! The value of the dollars used to be pretty stable for a long period of time, due to the evaluating system: the value of the gold or silver was converted into relative value in the economy). Why is the price of oil so high? There is a really simple answer â" because demand keeps going up but supply doesnât. Thanks to the horribly low value of dollar, oil producers arenât supplying the world market with enough oil. While the oil production from OPEC members fell, the former Soviet Union areaâs production increased. So the total world oil production might have stagnated, but demand has not â" it is growing, indeed. Simple as the demand and supply model. What is going to change this situation? Thatâs THE question.
related story: http://news.yahoo.com/s/ap/20071025/ap_on_bi_ge/oil_prices;_ylt=AtVURuSOw27lmkWZUTnig2us0NUE
| by Barbie Kunkelova for PocketNews (http://pocketnews.tv) |
PocketNews is a new real-time news broadcaster delivering the latest and hottest news right to your pocket ! With global clients who want to be kept up to date, PocketNews is everyone's way of keeping in touch with the World.
posted by Blog TechSource @ 2:08 PM
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