How oil prices are wrecking the economy ??

I liked this one coz everytime there's a hike media ( Aaj Tak, Star Zee news) & Left parties raise hue & cry..


Speculative trading
Traders bet on future prices of oil through commodity exchanges. If there is a natural calamity, or if a country's president or the boss of a global oil company makes a statement which could be linked to oil, the traders at the exchanges bet on a higher price in the future.

The record high price of nearly $140 per barrel is the July futures price of oil in the New York Mercantile Exchange.

Geo-political tensions, leading to supply disruptions
Caused by war, terrorist attacks or military warfare in oil rich countries, which could affect oil supply. The US sanctions on Libya, Iran and the war in Iraq have all affected oil prices

Blame it on shining India...
...and China and West Asia, where rising demand (at around 8 per cent from around 7 per cent a couple of years ago) is creating inequities between supply and demand

Controlled production by OPEC

The cartel of the world's largest oil exporters called the Organisation of Petroleum Exporting Countries, accounts for two-thirds of the world's oil reserves but only 40 per cent of world production. OPEC does not want the market to be oversupplied as it would bring down prices. High prices suit the oil producing countries

The dollar dunnit

That's right, as the dollar weakens and other currencies harden, crude oil prices, which are traded in dollar terms, move to compensate changes in dollar value.

India guzzles... 3.01 million barrels per day of crude oil 2.58 million barrels of petroleum products

But produces only

700,000 barrels of crude oil per day (23 per cent of its consumption). Demand for crude oil is rising by 7 per cent, while imports are rising by over 9 per cent. With rising prices, the import bill is ballooning, leading to a strain on government finances

Now you know the score

But will oil prices come down any time soon?

You're living in a fool's paradise if you believe that!

Russian company Gazprom, which supplies a quarter of Europe's natural gas, predicts oil prices, currently already very steep at $135 per barrel ($76 per barrel in 2006-07), will be $250 per barrel in 2009
Goldman Sachs has projected that oil prices could rise to $200 per barrel by the end of 2009 In fact, Morgan Stanley sees oil prices at $150 per barrel in the next three weeks
And closer home, the Oil and Natural Gas Corporation says three-digit oil prices are here to stay, so you might as well get used to emptying out your wallet at the gas station

Source: rediff.com