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Oil price rise: What is causing price rise across the world?

 

Oil prices are skyrocketing, not only in India but around the globe. The price of one barrel of crude oil is hovering around $80. Which is roughly around 4 times its price at the starting of the pandemic.

You could be wondering who decides the price of oil in the market and what are the factors that affect the price?

Well, the answer to your first question is the OPEC organization of petroleum exporting countries, it is a group of 23 countries. They dictate the price in the market by affecting the production and supply chain.

OPEC decides how much oil is going to supply to the market. When OPEC wants the price to go up it cuts back on the supply creating a false shortage in the market, which in turn increases the price of the oil.

OPEC countries rely on oil exports for a major part of their economy. Keeping the price high works in their interest.

Six countries have joined hands and come together to counter this price rise created by OPEC. These countries are the US, UK, India, Japan, South Korea, and China. They have decided to increase the supply in the market by releasing more crude from the strategic reserves. To ease the scarcity in the market in total 65 to 75 million barrels of oil will be released by the group.

In response to this move OPEC members are mulling at cutting down oil supplies for the as well as canceling the plans to boost production to neutralize this effect.

Even though OPEC has more leverage, the decision to release oil reserves by these 6 countries can be viewed as a bold step because it sends a signal to OPEC. That the world can challenge this market manipulation.

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