People always seem to debate the decrease in fuel prices. Recently, such gradual decrease has been witnessed in prices of petrol and diesel in many countries. But will this slow drop last? Triggering many other factors are the global market conditions, changing production rates, and government policies.
First, we need to consider why fuel prices decrease. When an increase in oil availability has caused a price decrease, this means that quite often, an increase in oil supply causes a drop in price. If a major oil-producing country, therefore, increases its oil production or if new reserves of oil are discovered, the oil supply in the market brightens, and thus prices drop. Alternately, any slowdown in demand during an economic downturn would be expected to influence price reduction. Fuel prices will drop if other sources of energy come on the scene.
On the contrary, a longer drop in fuel prices is subject to many other considerations. Any hints of geopolitical instability anywhere in the world may trigger a rise in fuel prices. For example, if OPEC countries were to cut production, that might result in a lower oil supply in the world market-and that should send prices back up. Other than those, natural calamities, wars, or any form of emergencies may interfere with the oil supply.
In fact, other than fuel prices, the emergence of global energy alternatives can assist in making fuel prices lower. When society starts using alternative energy sources such as solar and wind power, the demand for fuels will probably drop. Potentially, this could even achieve a long-term price drop. Nevertheless, such progress takes time and will face a lot of obstacles.
Government acts as an important variable influencing fuel prices. For instance, the change of government policies establishing taxation ultimately affects fuel prices through subsidy reduction and vice versa. Just as through environmentally conscious policies a government would be encouraging its people to explore alternative energy sources instead of fuels.
It must be mentioned that there is another key variable affecting fuel prices: the global economy. Fuel prices tend to increase whenever there is vigorous demand associated with a booming global economy. On the other hand, fuel prices take a downturn wherever demand has ebbed away due to the weak global economy.
In summary, the sustainability or otherwise of the recent decline in fuel prices depends on outside considerations. The economic conditions prevailing in the world and the political stability, as well as the aftermath of natural disasters and government policies, have an ever-engaging capacity to determine this situation. So, it is still difficult to predict whether the current drop in prices will become permanent or not. It is time to sit back and observe how the situation unfolds to gear up for impending alterations.