OIL PRICE ANALYSISZdenek Riha; Viktorie Jirova; Marek Honcu

Czech Technical UniversityFaculty of Transportation Sciences

Development, Energy, Environment, Economics (DEEE ´11)Tenerife, December 2011

Prezentation Structure 1. History of oil and their prices 2. Quantifiable factors and oil prices3. Another reasons of oil prices changes 4. Impacts of oil prices for economic and

using of alternative fuels5. Conclusions

NEWSPAPER IN 2009„The world prices of oil decreased yesterday for more than one dollar and

American oil were decreased to 35 dollars per barel. Main reasons were fast solution of Russia – Ukraine gas conflict and truce in region Gaza. The price of American light oil was lower about 1,30 dollar to aproximately 35,20 dollars per barell.“

… short news from 2009

The price follows from relation between supply and demand

• But question is:

… what are main factors, which influence supply and demand for oil?

HISTORY OF OIL- The oil was known by people for hundreds years (inhabitants in

old Syria used oil as ingridient in building industries)

- Oil was used as compensation of whale fat and row material for lithning since half of 19th century

- Since moment of oil using in means of transport the importance of oil increased: we can speak about change from natural resource to economic resource

- Big quantity of energy in small capacity is the main advantage of oil.

HISTORY OF OIL PRICES

Oil as economic resources – from beginning of the 20th century (Henry Ford)Oil crises: 1973, 1979, 1991, 2008

THE OIL PRICE AND QUANTIFIABLE FACTORS

- one of basic reason for growth of oil price in 2008

- there is no large influence on fuel prices (different between 2008 and 2011)

- in Czech Republic:2008 – fuel price: about 30

crowns per litre2011 – fuel price: about 35

crowns per litre0

20

40

60

80

100

120

140

60 65 70 75

Oil

pri

ce (

USD

/bar

rel)

Dollar value (USD vs. SDR - %)

RELATION BETWEEN GDP AND OIL PRICES

In the graph we can see the relation between oil prices and GDP G7 countries (USA, Great Britain, France, Germany, Japan, Italy, Canada)

But important is also increasing demand in countries as China or India

020406080

100120140

130000000 150000000

Oil

pric

e (U

SD/b

arre

l)

GDP of the G7 group (mil. USD/quarter)

WHAT HAPPENED IN YEAR 2008?We can define next basic reasons for changes of oil prices:

• SPECULATION- when the stock market does not flourish (mortgage crisis), investors turn to less hazardous assets as commodities like oil – it is case 2008

PRICES OF COMODITIES IN 2008CORN, WHEAT, RAPE, GAS

WHAT HAPPENED IN YEAR 2008?We can define next basic reasons for changes of oil prices:

• SPECULATION- when the stock market does not flourish (mortgage crisis), investors turn to less hazardous assets as commodities like oil – it is case 2008

• OIL PRODUCTION COSTS- stroken oil is hardly available and so necessarily the costs of its extraction have been growing

• POLITIC STABILITY

- above all in countries producing and exporting oil

• ECOLOGICAL AND OTHER CATASTROFS

- 11 th September 2001 and monetary politic in USA • OIL RESERVES ???

IMPACTS OF OIL PRICES ON ECONOMICS

- The fuel prices (depending on oil prices) are the most important part of costs in every transport

- There could be big influence on macroeconomical factors – inflation or unemployment

- From the longterm perspective oil prices will be the most important factor for implementation of alternative sources in transport

PROBLEM ALTERNATIVE SOURCES IN TRANSPORTATION

INDICATOR: Energy Return on Energy Invested- In beginning of oil production100- About 1930 60- Oil in Near East 30- Another oil 10 – 35- Oil from oil sand 3

Four groups of problems:

-Economic - Technological-Energetic - Environmental

CONCLUSIONSOil and its price is the key parameter of the development of an

economy. Through influencing the price of transport it has also effect on the inflation and everyday life.

Drastic growth of oil prices in 2008 was caused by decrease of the American dollar and speculations at commodity markets and growth of demand in China.

It is no easy to predict oil prices – there are factors, which are very hard to anticipate

Oil prices should be the main factor for decision about using of alternative fuels in transport (no state support and dotation).

ACKNOWLEDGEMENT

This paper originated as a part of a CTU in Prague, Faculty of Transportation Sciences research project on Design and Operation Networks Optimisation Methods Development (MSM: 6840770043), financed by the Ministry of Education, Youth and Sports of CR

Thanks for your attention,Thanks for your attention,

Zdenek Riha, Zdenek Riha, Czech Technical University in Prague;Czech Technical University in Prague;

rihazden@fd.cvut.czrihazden@fd.cvut.cz