Understanding Oil Prices
A Guide to What Drives the Price of Oil in Today's Markets
Despite the significant fluctuations in oil prices over the past decades, many people, including experts, politicians, and economic analysts, still do not have a proper understanding of the causes of these price variations. They attribute these fluctuations to reasons such as OPEC policies, increased demand in China and India, or taxes on oil products in Europe. However, these reasons do not reveal the underlying reality; for instance, one might ask what caused the price of oil to drop from $144 to $37 in just a few weeks at the end of 2008. Did demand from China and India suddenly surge? Were the Middle East unrests miraculously resolved? Did OPEC flood the market with oil? The answer to all these questions is no. This book seeks to explain the reality behind the volatile oil market. The price fluctuations over the past two decades have rendered none of the classic supply and demand concepts able to provide an explanation, and no country, consortium, cartel, or company has been able to control prices. This book identifies and elucidates the main players in the oil market, examining their interests, motivations, and interactions, and explores how oil became a financial asset and how reckless speculation in these markets has had a crippling effect on the global economy.