Oil producing countries in turmoil affect fuel prices
According to the OPEC’s latest report, the amount of crude oil produced in the first three months of 2011 are represented on this chart.
In February Egyptians fought for their freedom. After strong international and media pressure, the 30-year-old military dictatorship of Hosni Mubarak ended. People filled the streets of Cairo and risked their lives as they shouted for freedom. Blood, pain and anger were the common image all over the news. But two months later, Egyptians are working toward a transition, hoping for a better future in democracy.
Libya, which borders Egypt to the east, followed its neighbor’s steps and is also under political chaos. A civil war is being fought in an attempt to bring Moammar Gadhafi from power. The military leader has ruled the north African country for 42 years. The war has intensified since last February.
According to Reuters’ Michael Georgy, Libya’s officials blame NATO for the attack that killed Gadhafi’s son and three grandchildren. Seeking vengeance Gadhafi’s supporters attacked and burned the embassies of Britain and Italy, along with the U.S. Commercial and Consular Affairs Departments. Meanwhile, in March oil production in Libya dropped from 1355 to 366 total barrels distributed, resulting in a shortage of oil.
In Europe, Portugal has become a headache for the European Union after almost declaring its state of bankruptcy. Portugal is the second country after Greece whose economy has crumbled in the last two years. According to an article in El Pais, Spain’s newspaper, northern European countries such as Germany, fear Spain and other nations might follow the same path, weakening the euro and the Union’s stability.
According to Paul West from the Los Angeles Times, news in America suggest that U.S. President had lost popularity due to high gas prices which led to questioning about the legitimacy of his presidency.
Microeconomics instructor Alannah Rosenberg said that petroleum is an input to so many products, from gasoline to plastics, and is used in transportation of virtually all goods.
“Political unrest makes markets jumpy, benefits some, and hurts others especially with what just happened over the weekend” Rosenberg said referring to Osama Bin Laden’s death.
Today the euro is 0.04 cents higher than it was last week. According to x-rates.com the exchange rate is €1 per $1.48 dollars. It was $1.438 on Friday.
Opposite to what people think, the world’s situation is not the only cause for the increase in oil prices. According to Jonathan Stempel, from Reuters, the purchasing power of the dollar is weakening. As a result it takes more money to buy the same amount of fuel.
Depending on the type of monetary policy adopted by the Federal Reserve Bank, the dollar might continue to loose its value due to inflation. Vice Chairwoman Janet Yellen said the Federal Reserve bank’s $600 billion Treasury bond-purchase program and record-low interest rates are needed to help lower unemployment. She is part of a majority of members, who consider those programs are essential stimuli for the economy. Others have said the Fed’s programs could spur higher inflation.
Due to a expansionary monetary policy, as the Feds pumps more dollars into the economy, the currency looses value. According to the economic principle of supply and demand, the higher the supply of money in the market, the cheaper its cost. Therefore Americans are paying more for the prices of gas than some other nations.