Harish Palaniappan's

Monday's newspaper in India says Prime minister has called on a meeting to discuss rising oil prices around the world.. and Indians can expect a price hike because of this on Tuesday.

Firstly, Great News! Bravo. No matter whether we catch up with the foreign economy or not, we have to definitely catch up with this the oil price hike.. So finally we got something we can say proudly, we are in pace with developments in the world.

Why does oil price get hiked?
Technically, Demand increases prices.

So, if some somebody is ready to buy oil in the market at a higher price why not sell it to him. And if anyone else wants oil obviously they have to pay what he pays or more than that.
So, when America had a hurricane and some of its oil refineries and oil production got damaged, American companies selling oil have increased demand, and by nature they have to pay more to buy more oil which otherwise is being bought by someone else at normal price.

But Politically, Favourable reasons for the oil Markets.. increases prices.

The oil stock dealers (especially in dominating countries) always wait for a reason to increase prices of oil stock. When they get one, they increase demand and prices, sell the oil stocks that they own for higher prices.

These dealers dont bother about overall consequences it has, against the short-term gain they make. They ofcourse make HUGE gains. OIL stock is the most hot stock.

Actually, this happens with any stock in the market, foreign currency demand increases the currency's value (also has a political reason), but with oil stock the effect reverberates and stock price increases multifold because more dealers start doing it in succession.

Solution: There should be very stricter and stringent norms in markets for trading on natural wealth related stocks. There should be a stringent measure that not all dealers get into the act and only the needy do it on a temporary huge increase in demand... and later settle up the prices back to normal once the demand drop to normal in the region.

What do you say? Add your comments through comment link

---Update 8 Sep 05
Hey, Heard this News? - Malaysia will not raise fuel prices again until the end of 2005.

Looks like Malaysian government is taking the hike in its cost subsidising fuel. Bold decision huh! Totally unpolitical and people friendly.

Malaysian government stands apart... while all governments decide to push the burden to consumer, and sell national fuel reserves at higher prices and cash-in on gains.

----Update Sep 9 2005
Global corporation OPEC used to monitor oil prices and try control it every time it rose, by increasing output to meet increased demands, from some gulf country.

I believe they are doing it still...but for some strange reason there seems to be a coordination of allowing the prices to rise for a few months to make money, and then bring it back to lower prices (which still will be higher than normal prices that existed).

Statement by OPEC Conference President on the recent
rising trend in oil prices