When oil prices rise: forecast

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

In the 1990s, Russia's industry was virtually destroyed, and oil became the main source of income for the country's budget. Experts have long called this situation the “oil needle”, since dependence on the sale of raw materials makes us vulnerable. In recent years, we have all felt this well. Problems in the global economy and politics have led to a drop in oil prices, and each of us asks the question: when will oil rise in price?

How the market is formed

First of all, let's answer the question: what determines fuel prices? The price of any commodity depends on supply and demand. If a product is required in small quantities, but is produced in large quantities, the price of it will inevitably fall - it is necessary to sell the goods somehow. Oil is used in production, so the demand for it depends on the general state of the world economy. In recent years, there has been not just a stop, but a certain drop in the level of industry, less fuel is required, and supplyNot only did it not fall, it rose because of the policy of Saudi Arabia. Supply exceeds demand, so the price has fallen. It would seem that the answer to the question of when the price of oil will rise is very simple: when production grows. But there are other factors as well.

Undercover games

The cost of hydrocarbons largely depends on politics. It's no secret that the West has always looked with envy at the huge resources of Russia, and for a long time there has been work to weaken the country so that it becomes possible to cut off a piece of this pie. The so-called "oil needle" is Russia's weakest point, so the West decided to hit the hydrocarbon market specifically. What started the fall in oil? Previously, the amount of its production and prices were regulated by a special organization - OPEC. However, a couple of years ago the system “broke down”. Saudi Arabia and the United States have sharply increased production volumes, demand has grown. The goal is simple - to capture the market through dumping. Around the same period, problems began with the economies of China and Ukraine, which led to a drop in demand. Now the answer to the question of when oil will rise in price has expanded:

1. When the countries that are members of OPEC agree among themselves, realizing that the fall in commodity prices has hit everyone.
2. When the world economy starts to grow (there is hope primarily for China).

Stock Players

Expectations also affect the price of oil. All raw materials go through the stock exchange, and, according to experts, pricing here is verysubjectively. If suddenly there is a rumor that Saudi Arabia decides to cut production, and if market players believe it, then they will start buying oil in bulk in the hope of rising prices. Due to such artificially created demand, the cost will really begin to grow. But if the players are confident that the situation will not improve, they will prefer not to take risks and reduce the purchase of raw materials. As you can see, there are too many "ifs" to say when oil will rise in price, the price forecast for which must take into account a huge number of factors.

New discoveries

Science also cannot say whether oil will rise in price. Scientists have not even come to a consensus about what its reserves are on the planet! At the same time, news about the development of alternative energy is increasingly coming: wind and solar energy are being actively used, technologies have been developed that make it possible to produce gasoline from vegetable oil, and electricity from decaying garbage. While the level of development of such technologies is low, they are able to provide no more than 20-30% of the world's energy needs, but scientific research does not stop. When scientists will make a breakthrough, and whether they will make it, is impossible to say.

Don't forget about nuclear energy. In 2010, it strongly lost its positions, but large countries are constantly building nuclear power plants that can provide a lot of cheap energy. This process is not very active yet, since nuclear energy is very dangerous, but work to find the least risky solutions is ongoing.

What to expect from presidents

You can findmany expert opinions, but in reality, no one can say exactly when oil will rise in price. Many claimed that in 2016 its price would rise to $100 or even $150, but everything turned out differently. World politics today is simply unpredictable. A simple example: when sanctions were imposed against Russia, the same experts argued that our country's economy would collapse. But it turned out differently: Europe suffered much more, as the level of its exports fell. For Russia, the sanctions have become an impetus for the development of the economy. Today we are witnessing interesting changes in the foreign and domestic policies of many countries. In the US and Europe, in fact, there is a struggle between two courses: for cooperation with Russia and for confrontation with it. From the outcome of this struggle, it will become clear when oil prices rise.

Eternal problems of the Middle East

In the news on federal channels now you can rarely hear about the state of affairs in Iran, which is rather strange, because it also depends on its economy when oil prices rise. The embargo was recently lifted from this country, that is, its oil can now pour into the market. Of course, the recovery of the industry will take some time, plus it is not clear what position Iran will take. On the other hand, the situation in Syria is slowly but surely improving. As you know, terrorists actively trade in raw materials, significantly lowering their prices, since this activity is illegal. Provided that Iran decides to support Russia, and the banned organization ISIS is destroyed, it will be possible to say that the time when oil prices riseup to $80, not far off.

Russian Politics

It should be noted that many attempts by the West to weaken Russia have failed due to the competent behavior of the Russian government. In the conditions of falling prices for raw materials, we found new sales markets, significantly improved relations with the countries of the East and with some, albeit not the most important, European states. The coalition of Asian countries, which included Russia, is slowly but surely strengthening, and, perhaps, in the near future it will be able to resist the West. There are also changes in the domestic policy of our country, but they are still smaller. There is a significant growth in agriculture, work is underway to support entrepreneurship, but significant investments in heavy industry and oil refining, which could consume a large amount of raw materials, have not yet been observed. Nevertheless, in general, the Russian economy is becoming more stable, which will lead, if not to an increase in hydrocarbon prices, then at least to a decrease in dependence on them.

Let's try to make a prediction

What needs to be done to make oil more expensive? Yes, just continue the course laid down today. Perhaps it can be said that if the Western countries do not take some unexpected suicidal decisions, then the cost of oil will rise, albeit not at a high pace. Judge for yourself:

1. Saudi Arabia's economy has been hit hard by price dumping.
2. Iran and Syria are likely to be on the side of Russia, asearlier the West led them to decline.
3. European countries are looking for ways to get out of the crisis and build up the economy.
4. China has always been famous for its "economic miracles", plus it has lifted restrictions on having children. It can be expected that population growth, if not boosting the country's economy, then at least prevent it from falling even lower.
5. U. S. shale oil production has always been a dubious venture, and today we see it falling.
6. Asian countries have begun active cooperation and are looking for ways to make settlements without using the dollar.
7. The Russian economy is experiencing a reorientation, albeit still weak, towards light industry and agriculture.
8. Alternative energy is still unable to fully meet the needs of the global industry.

And yet, perhaps, we need to think not about what to do to make oil more expensive, but about how to get rid of the "oil needle". Whatever the forecasts and prices for raw materials, dependence on it will always make our economy weak and unstable, so the main thing today is not oil, but the comprehensive development of industry and agriculture.