Friday, March 02, 2007

Oil to runout of gas

While talking of upstream its imperative that we take into account the downstream too, because the cause and solution may well be laying there.

Crude oil is raw material used by refineries to produce petro products. Over a long period there was little investment in building new refineries. Building new refineries is a long process and takes few years to complete. With sudden spate in demand for energy in recent years, supply became scares and there was a steep hike in fuel prices. And as is always the case, raw material producers and all others in the chain have their share, so does the crude.

OPEC has always blamed refining bottlenecks for the recent hike in Crude prices and rightly so. Many new refinery projects have been chalked recently and will start operating by 2010 giving a big boost to fuel supply by that time and thus bringing down the prices of all products., which in turn will pull down crude prices.

On the other hand green activists are doing their bit by campaigning for the development of alternate sources and fuel efficient machines, which would also ease off pressure on fossil fuel.

Markets overreact so that corrective action is taken quickly and normalcy is restored...


At 10:24 AM, Anonymous Anonymous said...

very true.


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