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The Modern War: Oil price and macro-economy
The two friends I had a bet with regarding the oil price (I bet with them that the oil price would be below 80 USD at the end of 2008), have a surprised look when I tell the the oil price is now below 40 USD per barrel. They simply cannot understand what happened, so they ask me what my view is on the oil price for 2009...Obviously the economy is in a bad shape, and demand for oil is decreasing, driving down prices, but there is more. I believe too many powerful players benefit from low oil prices, putting a downward pressure to keep the prices low. First, the Oil & Gas majors saw many small players investing in all kinds of oil related activities. These activities range from refining (remember that Richard Branson wanted to set-up a refinery) to deep-see drilling or even reopening old depleted wells. This threatened the playground of the majors, and now is pay-back time: the current prices are below the cost of extracting the oil, hence these companies will have a very hard time, and consolidation is on the
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