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Rising Oil Prices Just the Beginning

Oil prices started moving up just about a year ago up to $ 147.70 per barrel, after prices had dropped to the mid $ 20 range. There were a lot of countries who were very happy when the prices started moving up, while other countries were stuck having to borrow money heavily to finance purchase of oil, with Asian countries being the ones who were hit most.

Oil Imports Critical to Asian Economy

Countries besides those located in the Middle East depend heavily on oil imports purchased on the spot. With prices shooting up beyond $ 140, there was a ripple effect that left many countries reeling for funds, because oil is one commodity that these countries cannot do without. Transport of goods depends on the oil that is imported, and when prices shot up, it left producers of goods with no option than to raise prices of other commodities. The overall effect was a price rise that hit the public and left them borrowing money as well.

Concern in the Middle East

Falling prices will be a concern to producers in the Middle East who were flush with funds when the prices were high. Because the Middle East sits on one-fifth of all oil reserves of the world, they demanded that prices be increased, and even resorted to cutbacks in production to create artificial shortages. Venezuela and producing countries in the North Sea created problems for Middle Eastern producers when this occurred. Now that oil prices are decreasing, the Middle East faces an economic crisis and it’s bound to cause discomfort.

OPEC Refuses to Cut Production

Oil prices are currently down to below $ 69 a barrel, and the Organization of the Petroleum Exporting Countries (OPEC) has stated that production levels will be held at the current figures with no changes or cuts until their next meeting on December 22, 2009. Middle Eastern producers doubtlessly are happy, though importers will look for existing reserves at better prices.

Lower Oil Prices May Reduce Countries’ Debts

Countries depending on import of oil for domestic consumption will be happy at the price levels that oil is currently being traded, because lower oil prices will not only help them control the spiraling inflation in their countries, but will also encourage lower loans from international sources. The decrease in oil prices might result in lower prices worldwide, but that remains to be seen. Some countries have reduced domestic prices, while others prefer to wait to see what happens first before acting. An example of this is that in India, domestic prices of oil still hover around the mark when oil was traded at its highest. But India is not looking to borrow money to pay for oil imports, because they have enough reserves that can help them through this ordeal even if prices rise again. Borrowing money might be an option for some countries in the region, or getting help from producers in the Middle East to meet requirements.