Decreasing Price of Oil

10-06-2008 14:00

With the tumbling economy the financial market was in need of a relief which came as the fall in oil prices. The bright move in the economy is the decline of 35 % in oil prices which is the most recent fall. The Decrease in Oil prices has had a positive impact on the equity and financial markets as the financial markets gained on declines in crude oil prices. According to Peter Dawson the decline of demand in conservation in the U.S. and the decline of commercial activities with the slowdown of consumption in developing countries like India and China are the major cause of this oil price fall.

This decline is seen as a positive effect by most economists and industry leaders which will benefit consumers and businesses in this year.

Rise in Oil Prices halted

Oil prices have witnessed a decrease in the recent months which is seen as a reversal of the crude oil market also. The oil prices rose continuously from 1947 to 2008 from U.S. $20 to $147 a barrel. The main reason behind this is that oil is limited and the recent rise was due to OPEC cutting supplies. The Organization of Petroleum Exporting Countries which was formed in the year 1960. The OPEC was founded by five members which were Venezuela, Saudi Arabia, Kuwait, Iraq and Iran. cut supplies early this year which was the main hammer on the economy and led to increasing prices. The current market trend denotes some fall in the oil prices which is because of the lower prices of the petroleum and refined oil products. Prices fell by almost 2.8 % which was witnessed by the 7.5 % decrease of the oil product prices.

Impact on the economy

Dawson commented that if the prices decline similarly in the future, they will help in avoiding a tax cut and will impact the consumers savings immediately. He also said that with Gasoline prices currently on an average of $3.60-$3.80 per gallon, the future prices should be between $3.20-$3.50 and some areas could see less than $3 in the coming months.

This relief package is bigger than any other package and this will impact the economy positively in the coming years and shall help in economy stabilizing. This has been seen as the most beneficial thing to happen to the U.S. and global markets.