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Tuesday, December 15, 2015

Low Oil Prices Globall - the reason

Around two years ago, the price of Crude Oil Globally was well above $114. However in the last 18 months or so the global oil prices have come down significantly and for the last many months the price of oil has been hovering around $40. Although, if you live in India you won't have felt the impact since the Indian government did not reduce the prices of petrol(gasoline) and diesel proportionately.

Now the question obviously rises, What is the cause of the drop in oil prices? Many say Russia started attacking Ukraine, so the western economies wanted to bring Russia down and convinced OPEC to boost production of oil that brought down the prices of oil. 

Russia has been severely affected due to the drop in oil prices. Rouble has lost lot of value, at the moment it is half of its peak value. Russian economy does depend a lot on crude oil exports. Russia has some of the largest reserves of crude oil in the world. 

However there is one more significant factor that has to be taken into consideration. Globally renewable and green energy technology is developing fast. The prices of solar power is almost at par with conventional energy and tremendous amount of research is being done globally on harnessing the power of the sun. Solar cells are getting cheaper and more efficient. Even cloudy nations like Germany are leaders when it comes to utilization of solar power. 

Secondly, researchers are also working on technologies to create petroleum from coal at a low price. The technology already exists for decades but it is becoming more and more economical now. 

Cars run on petrol(gasoline) or diesel. Research on electric cars have been done since the time of Thomas Alva Edison. However only now the electric cars manufactured by Tesla motors has become a rage in West. Even in countries like India, we have Mahindra Reva manufacturing electric cars. Again the running cost of electric cars, both Tesla and Mahindra Reva is very low as compared to conventional fuel cars. The maintenance cost of electric vehicles is also comparatively low. 

All the above mentioned facts are serious threat to the future demand of crude oil. Add to that USA which once was an oil importing nation, today exports oil. Hence globally the oil prices have come down and as long as the world focuses on green energy, the oil prices will stay down. 

The burning of fossil fuel is responsible for global warming and pollution in cities, rivers and seas. So the consumption of fossil fuel has to minimized for the sake of humanity. There is enough green energy that nature provides us, we just have to tap into them, to live a cleaner, greener, happier and healthier life. 

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