Oil price rise can be for good or bad. The current rallying of prices is indeed bad. Dealing with such price rises would rather be difficult for the governments and banks.
At any given point of time, using any sort of price marker, the oil news is just not good for a consumer. Since 2008, Brent crude touched highest levels to reach $130 per barrel overnight. US crude was at $110 per barrel, before it came down to $108. If these price rises were due to shortage of supply, or an increase in demand, it would have meant an upswing economical motion.
But the present case is vice versa, it is the short supply to the not so increased demands yet that is controlling the situation. Iran’s nuclear ambitions along with a denied Saudi explosion of pipeline have aggravated issues.
If the price rise would have been an outcome of increased demands, it wouldn’t have stifled growth, because high prices could have been matched by raising the labor prices. A supply shock affects the disposable earnings just like taxes do. It leads to a reduced demand, thereby weakening the economy.
The problem with oil markets presently is that in number of countries there are events that have a huge impact on supply and demand, thereby triggering instant reactions from the traders, giving way to speculations and volatility.
The recent pipeline story for instance points towards an obvious nervousness sin the oil markets, or anything that relates to the supply issues.
The US has been restraining Asian economies especially to reduce oil imports from Iran. They are of the opinion that other oil producers in the world are fairly placed to take care of any shortfalls. Some analysts also feel that with change in weather conditions, and with summers approaching, oil prices might soon receive some checks.
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