Wednesday, June 11, 2008

Oil crisis: What I understand!

After reading reams of articles on oil crisis, it has resulted in cooked porridge in my brain. But this is what I could make out in the end:

The price of global oil fluctuates only because of one parameter: Supply/Demand

This simply means, that when a country's population doesnt bear the direct brunt of oil hikes and is cushioned through its Govt's subsidies, there is no change in the oil consuming patterns of its citizens. Only when the subsidies are removed, will its citizens look for other alternatives and reduce consumption. This in turn will reduce global oil demand and thus global oil cost will reduce to below 100$ per barrel.

Its a simplistic explanation. But most of it is true.
And all these days i thought Govt's doing great in protecting the poor by subsidizing oil prices.

This is short, crisp and insightful article on who is responsible for the current oil crisis:

Also Swaminomics article:


Anonymous,  Friday, June 13, 2008 7:13:00 AM  

Your understanding is an indian understanding of OIL CRISIS.
There are no subsidies in US and UK still the oil crisis exist in those countries.

In simplistic terms oil crisis means that the oil supply in the world is less than the demand( your SUPPLY/DEMAND understanding is correct)

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