Factors Governing the Falling Global Prices of Oil

Published Date : Feb 10, 2015

The major drop in oil prices that the world has been witnessing over the past few months is a grave cause of concern for several economic forecasters. This trend of falling oil prices reaffirms the universal law that states that excess of something good may not after all be as good in the long run, and may at some point of time become rather dangerous. 

This sharp decline in oil prices says a lot about the performance of the global economy in terms of performance and productivity. It basically points to the fact that the health of the economy is failing seriously. Despite this, most of the economic indicators fail to confirm this serious situation. One of the main panaceas for economic downturns is tightening of monetary policy. This is a rather popular measure incorporated by almost each and every economy all across the globe in order to tackle the problem of economic slowdowns. 

Weakening economies of Japan and Europe are to a marked extent responsible for declining oil prices. For a rather long time now, global economic growth has been quite sluggish and slow paced. Even then, it would be unjust to hold the current global economic status responsible for such a drastic drop in oil prices. What makes it hazy to understand and know the total oil supply in the world is that there are several suppliers of oil all over the world who do not maintain transparency in terms of what they are producing. 

Fracking or hydraulic fracturing is the latest technology in the North America oil market which ensures greater access to energy reserves that were earlier inaccessible. This as a result has broadened the sources of oil supply in North America.