During June, the price of a barrel of oil dropped to an eight-month low, prompting hope of reciprocation at petrol pumps across the world.
Earlier in 2012, Brent crude oil reached $121 a barrel, short of the record price of $145, but still a high for the year.
So what has caused the price to drop to less than $100 in less than four months? This article will look into the reasons why.
As with all commodities, the price of oil is linked to supply and demand, with production based on the wants and needs.
If the requirement of oil increases throughout the world, so will its price.
Therefore the price of oil is dropping principally because there isn't the same demand for it as there was earlier in the year, leaving somewhat of a surplus.
Despite investor's concern at Europe's ability to reach agreement on the future of the Eurozone, sole blame cannot be laid squarely at the door of Europe and its ever-growing mountain of debt.
Economic data from the United States and China has been weak, which has contributed to worldwide fears among traders.
Saudi Arabia has also increased production of oil, which means that the world is now producing upwards of 91 million barrels of oil a day.
As increased supply is currently outstripping worldwide demand prices will inevitably fall.
Despite this the problems in Europe cannot be ignored as a primary cause for oil's drop in value with all asset markets being negatively affected.
As confidence in Europe remains low, investor's demand for oil will follow suit.
The double-whammy of low consumer confidence in the US, alongside China's low economic growth, has hastened this drop and increased attention on its price and the impact it's having.
This fall in the price of oil will have a knock-on effect for a number of different products, including petrol prices and heating oil.
There's an historic lag of three to four weeks between oil prices dropping and falling prices at the petrol pumps, which means that drivers around the world will soon stand to benefit.
Heating oil is produced from the refining of crude oil, which means that its price will drop in line with oil's wholesale price.
Alongside heating oil and petrol, the production of kerosene, diesel, solvents, propane and paraffin wax will all be affected by a fall in the price of a barrel of oil.
Earlier in 2012, Brent crude oil reached $121 a barrel, short of the record price of $145, but still a high for the year.
So what has caused the price to drop to less than $100 in less than four months? This article will look into the reasons why.
As with all commodities, the price of oil is linked to supply and demand, with production based on the wants and needs.
If the requirement of oil increases throughout the world, so will its price.
Therefore the price of oil is dropping principally because there isn't the same demand for it as there was earlier in the year, leaving somewhat of a surplus.
Despite investor's concern at Europe's ability to reach agreement on the future of the Eurozone, sole blame cannot be laid squarely at the door of Europe and its ever-growing mountain of debt.
Economic data from the United States and China has been weak, which has contributed to worldwide fears among traders.
Saudi Arabia has also increased production of oil, which means that the world is now producing upwards of 91 million barrels of oil a day.
As increased supply is currently outstripping worldwide demand prices will inevitably fall.
Despite this the problems in Europe cannot be ignored as a primary cause for oil's drop in value with all asset markets being negatively affected.
As confidence in Europe remains low, investor's demand for oil will follow suit.
The double-whammy of low consumer confidence in the US, alongside China's low economic growth, has hastened this drop and increased attention on its price and the impact it's having.
This fall in the price of oil will have a knock-on effect for a number of different products, including petrol prices and heating oil.
There's an historic lag of three to four weeks between oil prices dropping and falling prices at the petrol pumps, which means that drivers around the world will soon stand to benefit.
Heating oil is produced from the refining of crude oil, which means that its price will drop in line with oil's wholesale price.
Alongside heating oil and petrol, the production of kerosene, diesel, solvents, propane and paraffin wax will all be affected by a fall in the price of a barrel of oil.
SHARE
