| WHY
ARE PRICES SO HIGH?
Like all things in life, the price depends on supply and demand, and demand
has been growing as more and more people want it - especially in China
and America.
The short-term supply
has been disrupted by problems in large oil producing countries such as
Iraq, Saudi Arabia, Venezuela and Nigeria.
The increasing demand
and restrictive supply has therefore caused oil prices to sky rocket.
SO WHAT?!
The price of oil fluctuates daily, but most of the time the oil companies
don’t pass the cost onto us. However, with the current big rises,
they are left with no choice but to charge us more for goods such as petrol.
This means we’ll have to spend more each time the car is used...
and this will result in less money for luxuries! How about when you go
abroad on holiday? Planes consume a lot of fuel. On average, between 15-20%
of an airline’s total cost goes on fuel. In August, some of the
major airlines increased ticket prices to cover increased fuel prices.
So, now your holidays become more expensive.
Similarly, many companies
need transportation, and use it on a much larger scale than we all do.
Think about the many trucks you drive past on the motorway, and the cargo
planes at the airport... Increased oil prices means that the cost of getting
goods to our homes has increased.
Then there’s
electricity. We all use it - every day! Think about the power stations
that consume fuel, and all the factories that need power...
WHAT NEXT???
There is a society of 11 major oil exporting countries called the Organisation
Of Petroleum Exporting Countries (OPEC). They have decided to increase
oil production in an attempt to lower prices.
However, we all know
that there is only a limited supply of the ‘black stuff’,
and as it gets more expensive, more countries and governments will look
at other sources like wind and solar power, which are not only unlimited,
but also good for the environment.
By
Julian Warburton, Investment Banke
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