Oil prices unlikely to soften soon despite rise in US production; geopolitics associated with crude makes it an expensive product


Oil prices unlikely to soften soon despite rise in US production; geopolitics associated with crude makes it an expensive product

The rise in oil prices has come as a surprise for most policy-makers and analysts, for the obituary of expensive oil was written a long time back. The supply glut and the global fall in oil demand had contributed to a period of low oil prices before 2017.

The predictions of an era of cheap oil were however premised on the assumptions that any future rise in demand will be matched by higher crude and shale oil flows from the US, and that the countries will be able to wean themselves off the crude oil dependency by increasing the share of biofuels and renewable energy in their energy mix.

While the two phenomenon have taken place simultaneously, the degree of their impact on crude oil dependency, has not been on expected lines. This is because, more than the supply-demand economics, the prices of international crude are mostly determined by their accompanying geopolitics. Read More