Reasons for the Recent Decrease in Oil Prices

Oil prices are more of a concern today than ever, but how exactly did the price of oil decrease? It is a well-known fact that Saudi Arabia, Nigeria, and Algeria are three of the largest oil-producing nations in the world. What most individuals today are unaware of is the fact that the United States domestic production of oil has nearly doubled over the last six years. Additionally, nations such as Canada, Iraq, and Russia have also taken the initiative to increase oil production. According to basic concepts of supply and demand, when there is an increase in supply, price will decrease primarily because of a surplus in the economy.

Due to the increase in production by the United States, there is a decrease in imports so less oil is being purchased from oil tycoons in the eastern world. Not only is there a decrease in imports in the United States, but competition of oil in Asian markets is increasing, causing a colossal disaster as that will lead to decreasing prices.

One other major point of concern is the fact that Europe is becoming more energy efficient by equipping electric cars, causing a decrease in demand for fuel. While keeping the environment green is a positive effect for human health, it is detrimental to the health of the economy as this causes a decrease in demand for oil, which causes price to decrease.

Lastly, China’s recent currency devaluation plays a huge role in this situation because it causes a decrease in imports for oil. It is to be noted that China is one of the largest importers of oil in the world, so when the purchasing of oil from the overpopulated nation declines, there is a huge problem at hand. While there are many economic analyses completed on this topic, it is important to provide people with necessary knowledge on the plunge in oil prices, which has been the main focus of this article.

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