Venezuela’s Oil Minister Rafael Ramirez said in Vienna that his country could not afford to invest in major new oil exploration unless prices rise further. “We need a level of at least $70 [a barrel] to recuperate investment,” he said on Thursday. Muhammad-Ali Zainy, senior energy analyst at the Center for Global Energy Studies in London, says oil demand could increase quickly once the recession ends, especially as China has begun to build up its strategic oil reserves. “We think the price is going to go up gradually,” says Zainy.
Oil prices are all about money. Gas prices have increased even though demand is down. The summer blends that are required in parts of the United States have always been a bit higher. Plus, summer has traditionally been driving season. So even though fewer people are really going out and take vacations, thy might take a road trip which requires gas. Also other countries need gasoline as well.
Consider if you are basing your projected expenses and budget on a certain amount of income you can survive. None of the oil producing countries were complaining when oi was selling for more than $145 a barrel. Now that the price is less than half of that, they can’t manage. Just like municipalities that were accustomed to using tax revenues for the budget and now have shortfalls because of unemployed people contributing less to the tax coffers, something has to happen. In the case of oil, production has slowed.
When demand increases for oil, OPEC countries are encouraged that the global recession is lessening.