Oil Prices and Environmental Effects

Time and time again we see oil prices changed proportionally to upcoming environmental events. Current:

NEW YORK (Dow Jones)–Crude futures rose above $79 a barrel Monday on concerns about the threat Tropical Storm Ida poses to U.S. oil and gas production facilities in the Gulf of Mexico. A weakening in the dollar also supported prices.[Source]

That’s a relatively big number considering the amount of oil reserves that are available. Also, another interesting fact is that prices are relatively high because production levels are as lost as post hurricane conditions. This is partially because of the high oil reserves and the demand of oil in the marketplace. The low production level, the upcoming hurricane, and the amount of reserves all contribute to the price of oil. Production can be increased, but where is the product stored? The current situation is that the high supply is actually causing high prices, which is completely counterintuitive to the supply and demand model as it pertains to product price.

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