Will the price of oil continue to fall?

Since early August, the international crude oil price has decreased from US$77 per barrel to below $60 early this week. The former chief of OPEC predicts that the oil price may fall to $40 per barrel, the cost 8 years ago.

The price of crude oil price has been increasing since 1998. Just before August it increased sharply before falling just as rapidly. Generally oil price fluctuations should be compatible with long-term investment in oil production. A sudden increase or decrease in oil prices is related to international opportunistic investment ¨C when a significant opportunist fund makes a purchase, the price will suddenly increase. If it withdraws its funds the price of oil will fall sharply. It has been estimated that when the oil price is above $70 per barrel, at least 30 dollars of that is floating money. According to market demand and supply, the price of oil will settle after a sharp increase.

In the long run, because of the possibility of price hikes, various countries have adjusted their energy policies and restrictive factors have begun to play a role.

The oil price hike has led to deflation and an increase in interest rates. The world economy is also expected 'cool' and this too has affected the demand for oil.

Some people think the US will change its oil price and dollar policy. The US may take measures to force down the oil price and weaken countries like Venezuela and Iran as well as halt the rise of Russia.

Some oil producers and consumers have adjusted their policy on energy by either increasing their investment in oil extraction or finding alternative energy resources to put pressure on the price of oil.

The discovery of new oil fields has caused people to expect lower oil prices. The US has discovered a new oil field in the Mexican Gulf. It's expected that the amount of oil in storage in the US will double because of this field. This will push down world oil prices.

The pressure in international 'hot spots', such as Iran, has decreased, and even if some countries do impose sanctions on Iran, they will not be related to the export of oil.

It is predicted that this northern winter will be a warm one, so the demand for oil will not be as high as expected.

It remains to be seen whether or the current low price of oil will last. After all, oil is a strategic material and limited resource that is in great demand. There is a lot of extra money in the world financial market but few products worthy of investment, so oil remains an important area of investment. It is unlikely that the price of oil will drop back to what it was 8 years ago. In the long run, the conflict between supply and demand will only be eradicated by a breakthrough in alternative energy resources. Based on the current technology, only when the price of oil is above $40 per barrel, will coal conversion technology have a commercial future. Other emerging technologies will take time to perfect. Therefore, the opinion of the mainstream is that the price of oil will fluctuate between $40 and $60 per barrel in the current international political and economic environment.

By People's Daily Editor Huang Qing and translated by People's Daily Online