- moved from blog 'Life Movie Fun'
I am late in doing research about my own posted questions, but the topic was so wast that it took time to find proper stuff on even one point. Here it is for Petrol -
Price for petrol is mainly a result of typical 'Supply and Demand' rule. Many factors are contributing in this demand which are -
1. World population is increasing faster than rise in oil production.
2. More countries are growing fast (mostly developing countries) and so for growth more energy requirement are increasing oil consumption.
3. Almost 1/4th of oil consumption is subsidised in world. Due to this even though price has increased, demand is not reducing.
4. Transportation is increasing day by day and it mainly is running on oil. It is very difficuly to cut down on this sector as it is main need of developing nations.
While above factors are increasing demand, there is another concept of future buying. In this countries/industry quote a future price of crude to reserve an amount of oil for them. This also gives a higher end indication of how much demand has increased and so hikes the price.
Supply is mainly from oil well in Saudi coutnries where reserves are being used more and more while new resources are not being found to provide enough oil to meet demand. It is also getting difficult to extract oil from current resources and that increases the cost of production. Result - an increase in price so that where it is not feasible to continue running the work with increased price, work will be stopped and so consumption will reduce. Pressure is more on developing nations to cut down subsidy (like India and China has agreed to increase price due to hike in crude price) so that consumption will reduce. These measure will help bring a stability in price and an equilibrium will be reached where market will continue its progress.
Major support in this will come from alternate resources, like in Canada - Tar Sand. These are big amount of oil reserves and very big in Canada. Till now it was not profitable to extract oil from these due to lower prices. As price has increased which makes if feasible to extract oild from these places, there would be additional production at price where stability would reach for oil production. On that price, for some more time, it would be better for market to utilize these extra inlet of oil in industry and grow at higher rate.
So, Price is surely going to increase in future for petrol, but what we can expect is that there would be better supply of oil at this price and one can think of utilizing it better way and balance the advantage such as to neutralize the loss due to increase in price. Way to go :)
