Tuesday, 27 June 2017

Are Lower Petrol Prices Good?

Petrol prices are going down very quickly. It would hard to find a motorist not enjoying the savings he is achieving. Is it all good though and why is it happening?

Why? Nations that formed OPEC were the major suppliers and therefore controlled petroleum production. Keeping it tight meant better prices for them. Going too far risked crippling buyers so a balance was necessary. That is how capitalism works.

Now that new ways of extracting oil have been found means the OPEC nations no longer control supply. As the newly accessible fossil fuel was released, it increased availability and reduced the price that could be gained. OPEC nations such as Saudi Arabia have kept up production and the flood of petrol has caused a price slump. OPEC has lost control of oil supply.

Benefit: Lower prices for the motorist.

Detriment: Car makers. Car manufacturing requires planning years ahead and I am sure their plans did not include crashing fuel prices. They are also being pushed in the US and Europe to lower CO2 emissions and higher fuel prices have been their ally in that. Consumers went for smaller, less polluting vehicles to save on fuel. The CO2 targets may have to be revisited or incentives (and disincentives) introduced.

Is electric propulsion one you could choose?
Summary: Is the car buyer interested in the planet or simply buy whatever they can afford to run? Smaller is still more efficient. The planet is still being polluted. Why let the governments force motorists to reduce CO2s when they can do something themselves? Electric cars have advantages if range isn't an issue.

So whether lower prices are good or not depends how you look at it. Our perspective will answer that for us.

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