Reasons For High Fuel Prices
Petrol prices have become a common complaint among motorists. At least with car brokers, you can save money on your car purchase.
Global Market
Oil, the unrefined commodity required to produce petrol, is a globally traded commodity. It's value rises and falls based on it's supply and demand. Any changes, or expected changes to this balance results in a change in the price of oil.
Global Unrest
Any global unrest that might affect the supply of oil (with demand staying the same) is likely to cause an increase in the price of oil. Price spikes were therefore seen during the outbreaks of the last two Gulf Wars. With these wars, reliable supply of oil from Iraq, a major oil producing nation was affected. The oil price therefore shot up. Similarly, when periodic tensions in Nigeria affect the supply of oil from that country, oil prices often spike upwards.
Oil is Getting Harder and More Expensive to Find
Most of the earth's easily accessible oil has been found already. As some of these producing wells run out, new sources of fuel need to be discovered. This is leading major oil players to search for oil in more remote locations, often with more technically challenging extraction requirements. BP's recent troubles with the huge oil spill at a deepwater oil platform serve to remind us of these challenges.
Extraction Challenges
With more difficult extraction challenges come increased extraction costs. Oil prices need to remain above a certain level, otherwise recovering from such locations is uneconomic. Naturally, if such production does not take place, dwindling supply from existing global production will eventually increase oil prices, as existing demand competes for this reducing supply.
China and India
With new oil finds not replacing existing diminishing production, two emerging economic giants make the problem more acute. India, and more particularly China, who together make up over a third of the world's total population (China - 1.3 billion, India - 1.1 billion) are on fast paths to industrialisation. With this comes increased demand for oil, as these countries develop. With flat supply, and increasing global demand, oil prices, and therefore petrol prices will naturally rise. The global financial crisis, and the slowdown in economic activity has seen oil prices drop dramatically from a record US$147 a barrel in July 2008 to currently under US$80 a barrel in July 2010. As world economies begin to recover, expect oil to resume on an upward trajectory.
Options for Motorists
It is easy to understand motorists becoming frustrated, angry and feeling powerless with the dramatic rise in oil prices over recent years. There are a few options for motorists though, and some hope for the future. On a personal level, car pooling, and combining driving with public transport can help motorists mitigate petrol price pressures. Switching to smaller cars, with low fuel consumption is also something many motorists have been doing. From an industry standpoint, advancements continue to be made with regards to fuel economy. Alternative fuel sources continue to make inroads, with hybrid cars becoming increasingly popular. Electric cars are now being released by global manufacturers. As these developments gain pace, motorists' reliance on oil should hopefully reduce over time.
Certain car brokers involved in fleet sales can offer you great car deals, by purchasing on your behalf.
Global Market
Oil, the unrefined commodity required to produce petrol, is a globally traded commodity. It's value rises and falls based on it's supply and demand. Any changes, or expected changes to this balance results in a change in the price of oil.
Global Unrest
Any global unrest that might affect the supply of oil (with demand staying the same) is likely to cause an increase in the price of oil. Price spikes were therefore seen during the outbreaks of the last two Gulf Wars. With these wars, reliable supply of oil from Iraq, a major oil producing nation was affected. The oil price therefore shot up. Similarly, when periodic tensions in Nigeria affect the supply of oil from that country, oil prices often spike upwards.
Oil is Getting Harder and More Expensive to Find
Most of the earth's easily accessible oil has been found already. As some of these producing wells run out, new sources of fuel need to be discovered. This is leading major oil players to search for oil in more remote locations, often with more technically challenging extraction requirements. BP's recent troubles with the huge oil spill at a deepwater oil platform serve to remind us of these challenges.
Extraction Challenges
With more difficult extraction challenges come increased extraction costs. Oil prices need to remain above a certain level, otherwise recovering from such locations is uneconomic. Naturally, if such production does not take place, dwindling supply from existing global production will eventually increase oil prices, as existing demand competes for this reducing supply.
China and India
With new oil finds not replacing existing diminishing production, two emerging economic giants make the problem more acute. India, and more particularly China, who together make up over a third of the world's total population (China - 1.3 billion, India - 1.1 billion) are on fast paths to industrialisation. With this comes increased demand for oil, as these countries develop. With flat supply, and increasing global demand, oil prices, and therefore petrol prices will naturally rise. The global financial crisis, and the slowdown in economic activity has seen oil prices drop dramatically from a record US$147 a barrel in July 2008 to currently under US$80 a barrel in July 2010. As world economies begin to recover, expect oil to resume on an upward trajectory.
Options for Motorists
It is easy to understand motorists becoming frustrated, angry and feeling powerless with the dramatic rise in oil prices over recent years. There are a few options for motorists though, and some hope for the future. On a personal level, car pooling, and combining driving with public transport can help motorists mitigate petrol price pressures. Switching to smaller cars, with low fuel consumption is also something many motorists have been doing. From an industry standpoint, advancements continue to be made with regards to fuel economy. Alternative fuel sources continue to make inroads, with hybrid cars becoming increasingly popular. Electric cars are now being released by global manufacturers. As these developments gain pace, motorists' reliance on oil should hopefully reduce over time.
Certain car brokers involved in fleet sales can offer you great car deals, by purchasing on your behalf.
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