In India, the demand for crude oil is rising by 7 per cent, while imports are rising by over 9 per cent. We're paying more for petrol (and diesel, and LPG) -- but does anyone know why? So, okay, oil prices have doubled in just over a year. Here's why:
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
Text: Rakteem Katakey, Business Standard
Image: Fire flames rise from a petroleum well at an oil refinery in the oil rich city of
Kirkuk, north of Baghdad. | Photograph: Marwan Ibrahim/AFP/Getty Images
Also read:
How to survive the oil shock
Advertisement
