Why did oil prices go down?

Question

Why did the oil price go down by 50 cents in one week?

Were they raised for the summer? Who raised them? Who controls them? Is it oil tycoons or the government?

Answer 1

The oil prices are controlled by markets. In other words by no one or by everyone. There is a cartel that tries to control them but they have limited affect.

It works like this. Change in the quantity of oil that people demand is very limited in the short run but in the long run it can change a lot. What I mean is if oil goes up a dollar a gallon you are going to continue to buy the same amount. After a year or so you might get a car with better mileage. So in the long run the demand for oil is flexible.

At the same time getting oil has extremely expensive start up costs but extremely low pumping costs. It also takes a long time to get new oil. So it takes a high price for a long time to encourage oil companies to drill.

What does all this mean. In the short run it takes an extreme change in the price of oil to get the quantity demanded to match the quantity supplied but in the long run the price will balance out.

In this last hike, people bought hybrids, they get nitrogen into their cars, and they moved closer to work. Oil companies drilled more wells.

Now that all these things are in place the opposite can happen. Just because the price goes down doesn't mean the oil companies are going to shut off the new pumps and people aren't going to trade in their new hybrid next week for an suv.

This could push prices to extremely low levels like they were in the winter of 98/99.

Answer 2

Oil prices are largely controlled by thousands and thousands of people buying contracts for future delivery of oil, usually 6 months out. Those investors bet that the price will be higher or lower in the future and buy sel those contracts accordingly. Late Spring this year there were many concerns that hurricans would further damage oil production in the Gulf of Mexico, that hasn't happened. There were fears that the war in Lebanon would cause Arab oil disruptions, which also did not happen. Summer is the season when many motorists buy and use much more gasoline than usual, but not as much as is usual this Summer. So Contract buyers/sellers were expecting more problems than actually happened and now prices are falling to reflect that situation.

Prices for oil contracts are like real estate prices. If everybody wans to live in the same neighborhood those home prices go up alot, compared to prices on the other side of town. If preferences change so do prices. Sometimes they change for visible reasons, ex. that neighborhood is too prone to wildfires; sometimes prices change for sublter reasons.

Answer 3

I don't think oil prices have gone down much, but gas prices have taken a nose-dive here. They (the oil companies) always seem to raise them for the summer because that's peak driving season and they seem to drop some once school starts. The U.S. government technically has no control over gas prices, but you can bet that the oil companies and the politicians are in cahoots. How else can Exxon post a $12 BILLION profit for the third quarter of 2005 and Congress says they weren't price gouging? What a crock...

Answer 4

Elections coming up in November. The Gov and oil tycoons know we need gas to get to work ( if you use 1 tank of gas per week just to get to work,weather it's $2.00 or $6.00 per gal you will pay it) Overall we have cut down on oil use...the price cont. to rise...but the oil tycoons reap in big tax breaks and report hugh profits. I'm waiting for Joe Blow to start a new auto plant and mass produce an all electric car that is self charging and cost under $20,000. My God there are # of web sites where back yard mech. have built them....without Gov help. I'm sorry I'm getting carried away. Have a good day.

Answer 5

Nothing in this country just "happens" by accident to benefit working class people. It had to have something to do with a dollar bill; and I think, in this case, the automobile companies are losing they as*ses on large cars/trucks/RVS that just were not moving because of the high coast of gas. Now it went down. Ford is laying off 10,000 workers. All the auto companies feel like they will be better able to sell their surplus to gas-guzzlers. Give it a few months, and it will be right back where it was before. We're a complaisant nation; we just take whatever comes along instead of doing something positive to stop being raped by the government. Godloveya.

Answer 6

Reason #1-Vacations are over. People aren't traveling now. #2-OPEC prices have dropped. #3-We have a glut of oil in the US at this point. Experts feel that prices will be closer to $2,00 a gallon, than $3.00 a gallon before the year is out. Keep your fingers crossed.

Answer 7

there are many reasons: one is seasonal demand. during Fall, people use less oil for heating (probably nothing!), and less people are driving for vacations as the summer vacation period is over, other factors include geopolitical tensions. I.e. Iran, Nigeria, Israel-Lebanon conflict -- all of these issues have been quiet during the last while.
who controls is it? OPEC. go read up on wiki

Answer 8

I would bet they are down and will stay down until the elections. Just wait and see. After the elections they will go right back up.

Answer 9

They felt filthy rich enough for one summer.......of course it was the government.

Answer 10

due to high consumption/demand & less supply,
its a conventional resource of energy