Major Oil Isssues Essay Example | Topics and Well Written Essays - 4500 words

Major Oil Isssues - Essay Example However the supply of crude oil in the international market has been rigid. This creates the pressure on the prices of the oil. This fundamental theory of the international market as well as the economy of the world provides the explanation for the process or the trend of the fluctuation in the price of crude oil. Within the period 2004 - 2006 the capacity of the production of the global oil had not been able to keep in pace with its demand that had been increasing rapidly. The demand for oil had been on an increase more for the emerging economies of the continent of Asia, China, and also the United States of America. The demands for oil have an increase of 1.4 million barrels per day for the year 2005 as compared to 2.7 million barrels per day increase in 2004. This increased demand of oil had been accompanied by a continuous increase in the price of the same. According to the market specialists the price of oil is expected to remain jumpy and almost volatile. Moreover the price of this particular resource is expected to face a continuous rise rather than decrease. There is a high probability that the price will remain above the expected mean value of the price. (Krichene, 2006, pp 3- 4: Gautier, 2008, p 110) However predictions about the persisting trend of oil price vary among scholars. In the words of Xu, Chen and Han the main obstacle that arises in the prediction of the price of the crude oil is uncertainty. The various models along with the methods for computation that are present help to forecast the price trend in literatures. However most of the methods have not been able to predict the existing and the future variability of the prices of crude oil in the most effective way. For the betterment of the methods of computing the variations in the price econometricians have made several attempts and they have suggested different methods that are suitable for measuring and predicting the volatility. (Huynh, 2008, p 353) The paper aims at studying the expect ed trend of the oil price in the recent future with special emphasis to Australia. Peak Oil Phenomenon and Discussions around the World The past century had experienced a major growth of population but lesser instances of food shortages. The material requirements of the people had also surged. All this was achieved due to the growth of production of oil. The immense growth of oil production hugely benefited the food productions, wiped out the occurrence of famines, and made other daily human activities simpler (Hall & Day, 2009). The huge oil production made oil cheaper and the civilization moved forward based on oil-based energies. However, this also led to a huge depletion of oil reserves and ecologists predict that Peak Oil is not far away. Peak Oil is a phenomenon by which the global oil production will reach its highest stage and then it will start to fall at a very fast rate (Cork, 2010). M King Hubbert, a geologist working with Shell predicted a bell like life span of petrole um production in United States in 1956. According to Colin Campbell, the peak of discovering new fields had reached during the 1960s. He gives a fair assessment of the situation. According to him, the peak depends on the discovery of new fields, which has slowly decelerated, and the extraction rate of oils, which depends on the nature of the reservoir (Campbell, 2002). Presently the world consumes about four times the oil that is