Oil has been a hot topic of discussion for some time now. Ever since the global oil supply glut hit the limelight nearly 3 years ago, the price of oil has been at devastating lows. Last year and early this year, it was hoped that OPEC supply cuts would help to increase the price of the commodity. However, the price has fallen below the key $50 per barrel mark yet again. So, what’s causing the decline this time and will it last? Today, we’ll talk about what’s going on in the world of oil.
Why Oil Prices Continue To Fall
At first glance, it may seem as though oil should be trading on gains. With all the talk about OPEC supply cuts and cuts from non-OPEC members that we heard earlier this year, it seems as though we should be well on our way to gains here, but that’s not the case. So, why does oil continue to fall? Well, it all boils down to the reason the commodity fell in value in the first place, the law of supply and demand.
I’m sure we all remember about three years back when the global oil supply glut started to come into the picture, and the conversations to follow suggesting that supply cuts were the only way to solve the problem. Well, the truth is that the supply cuts simply aren’t working.
At the end of the day, while OPEC has cut production a bit, and so too have many non-OPEC oil producers, those cuts to production simply aren’t proving to be enough. At the end of the day, the cuts are relatively small in the grand scheme of things. Plus, the equation isn’t simply a supply one, it’s a demand one as well, and demand isn’t so hot either.
Renewable Energy Is Leading To Lower Demand For Oil
While supplies are down slightly, that doesn’t seem to be helping to lift the price of oil, and for good reason. The reality is that at the end of the day, demand is a big part of this equation as well, and demand is yet another major concern.
You see, these days, consumers are becoming more conscious of the fact that burning fossil fuels is a horrible thing for the environment, and they are starting to take action. In fact, just a few years ago, solar power only accounted for about 1% of the world’s electricity demand. Today, it now accounts for around 2%. That may not seem like much, but in the grand scheme of things, reducing demand for oil by 1% could cause major pain for the price of the commodity.
However, that’s not the only area where renewable energy has caused a decrease in oil’s demand. Think about all of the electric cars. Sure, the electricity that runs them is largely created through oil, but much less of the commodity is used in this process, causing even more declines in demand.
What Binary Options Traders Should Be Watching For Ahead
We all know that oil is going to present several opportunities ahead. However, if you want to take advantage of these opportunities, you’re going to have to keep a close eye on the news. In particular, pay attention to news revolving around both oil supply and oil demand. The bottom line is that anything that causes movement in the supply and demand metrics surrounding the commodity will likely cause movement in the price of the commodity itself.
What Do You Think?