It's just a break, not the stop

High Oil Prices:

The rise in the oil prices has an ominous effect on the world’s economy and has put the lives of masses depended on it at stake. Even though the margin between what is produced and what is consumed on a daily basis has never been narrower and major innovations over this field are few and far between, the supply crisis does'nt significantly explain the sharp spike in the oil prices. 

Rather the frequent violence in the middle eastern countries, the ethnic tension in Nigeria and the predominant strikes in Venezuela and other complicated geo-political reasons have forced these major oil producing  countries to operate with lower stocks so as to become efficient. Also, OPEC which accounts for half of the world’s oil exports attempts to keep the prices where it wants by trimming supplies to the market. Thus the lower stocks  and the OPEC’s strategy has resulted in a disturbed supply-demand ratio. 

Above all the market speculation has played a significant role in the projection of oil and gas prices. This includes not only the commodity funds and hedge funds but also the large institutional investors such as pension funds and mutual funds which have become major participants in the energy markets over the past years. It is estimated that over 100 billion dollars are poured in the regulated oil markets while the figure that has gone into the non-regulated oil markets is inestimable and therein lies the problem. The trading commissions are constantly monitoring the position of large speculators and oversees their internal markets but they do not have any jurisdiction over the exchanges in the external markets where billion of dollars of contracts are  traded all the time. Thus the speculative money flow which cannot be regulated exposes the oil markets to price manipulation and price distortion.

But higher oil prices is not the end of the world. These sort of scenarios have also been in the past and are successfully dealt over. For oil companies the high oil prices are an incentive to look for new oil supplies and to try and amend their general oil efficiency. To be frank, the hike in oil prices encourages a wave of innovation and an improved consumer behavior. Let’s hope for a reinforced situation in our near future.