Who controls or decides the oil prices? A simple answer!

Posted December 10, 2020 / Finance
Who controls or decides the oil prices?

In a perfect world oil prices would have been controlled by global supply and demand, but in practice there is too much politics involved. The countries that produce oil often make political decisions that have a strong influence on the oil prices.

If the world economy is okay and there is no crisis in sight, the oil prices constantly grow as a result of a growing demand. But if something goes wrong, as it was in 2020, then the oil prices drop sharply and the oil-producing countries try to bring them back up by making political deals to reduce rhe supply. Oil production requires a lot of investment, so you cannot effetively sell oil at 1 or 5 bucks per barrel. This means that no matter how low the demand is, there is a minimum price the oil could beproduced and sold at. But as the world moves to greener sources of energy, the uncertainty on the oil market will persist. We think that oil prices will never rise as high as $100 per barrel, but from the other hand they are unlikely to drop again below $20 per barrel, as it happened in 2020.

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