Sunday, November 15, 2009
Oil rise 'could derail recovery'
There has been an increase in oil prices this year and it is being traded at the price of $77 a barrel. The price of oil fell $2.43 to $76.85 a barrel on Thursday after rise in US oil supplies. According to IEA the real economy suffering from recovering as compared to the financial one that is without stimulus spending the progress of the economy will die. There will be an increase demand for oil in the near future as there was an increase in oil demand in 2009 by 210,000 barrels to 84.8 million barrels a day.
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3 comments:
It is true that oil prices will rise as the recovery takes hold and demand increases. However, one must not discount the effect of OPEC. As the world fell into recession and demand plummeted, OPEC cut production to create a floor for oil prices. Thus, as oil prices rise, there would be an incentive for OPEC members to sell more oil, raising supply and moderating the increase of oil prices.
I believe that this is a clear indication that the US government and other institutions should invest our dollars into alternative energy sources. By relying so heavily on fossil fuels we are increasing the probability of our economy slipping further into a recession if oil prices continue to increase.
While I agree with Taleb about the need for investment into alternative fuels. Those technologies take a while to be perfected and distributed wildly in the market. Something needs to be done now in a effort to decrease prices on Crude Oil. Perhaps the United States could start to use some of the oil we have in our own country, while we develop alternative fuels.
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