Vehicle Fuel Price Drop

Vehicle Fuel Price Drop

Here at Cleveland Scrap Cars, we buy junk cars and pay cash for cars throughout Cuyahoga County. As a junk car buyer and scrap car hauler, the drop in fuel prices is an obvious boost to our bottom line. Since a scrap car hauler relies heavily on gasoline to retrieve junk cars and scrap cars, we are extremely curious if this will be a sustainable decrease or merely a short term event. The question is what is causing this surprisingly steep reduction in the price of oil? I will review the opinion of two trusted sources: The Economist and Fortune Magazine.

A December 2014 article on the economist.com titled ‘Why the oil price is falling’ cites the following explanations: “The oil price has fallen by more than 40% since June, when it was $115 a barrel. It is now below $70. This comes after nearly 5 years of stability. At a meeting in Vienna the Organization of Petroleum Exporting Countries (OPEC), which controls nearly 40% of the market, failed to reach agreement on production, sending the price tumbling. Four things are now affecting the picture. Demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels. Second, turmoil in Iraq and Libya—two big oil producers with nearly 4m barrels a day combined—has not affected their output. The market is more sanguine about geopolitical risk. Thirdly, America has become the world’s largest oil producer. Though it does not export crude oil, it now imports much less, creating a lot of spare supply. Finally, the Saudis and their Gulf allies have decided not to sacrifice their market share to restore the price. They could curb production sharply, but the main benefits would go to countries they detest such as Iran and Russia. Saudi Arabia can tolerate lower oil prices quite easily. It has $900 billion in reserves. Its own oil costs very little (around $5-6 per barrel) to get out of the ground. The main effect of this is on the riskiest and most vulnerable bits of the oil industry. These include American “frackers” who have borrowed heavily on the expectation of continuing high prices. They also include Western oil companies with high-cost projects involving drilling in deep water or in the Arctic, or dealing with increasingly expensive fields such as the North Sea. But the greatest pain is in countries where the regimes are dependent on a high oil price to pay for costly foreign ventures & social programs. These include Russia & Iran (which is paying to keep the Assad regime afloat in Syria). Optimists think economic pain may make these countries more amenable to international pressure.” For the complete article check this link: http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-4

Tom Huddleston of Fortune in December 2014 that offers the following thoughts: “Put simply, global oil supplies are exceeding demand & driving down prices in the process. A major factor has been the explosion in U.S. oil production, up to almost 9 million barrels per day & expected to hit the highest levels next year. Another factor is the struggling economies in Asia & Europe leading to a decrease in oil consumption. China, one of the world’s largest oil consumers, has economic struggles resulting in its demand for oil being outpaced in India. that has also struggled financially of late. Saudi Arabia cut the price of its crude to the U.S. earlier this month, which has propelled the sell-off. OPEC, the cartel responsible for 1/3 of global oil production, said it would keep its self-imposed output at 30 million barrels per day. The announcement sent oil prices down further as OPEC’s quotas will do nothing to lower overall oil output that is consistent with demand. The Russian economy has been hit hard by plummeting oil prices and is acknowledging the likelihood that it will enter a recession. Russia’s ruble suffered its largest one-day dip in value — nearly 9% — since 1998. Lower oil prices don’t necessarily doom the U.S. shale boom, as the industry’s efforts to improve efficiency in the production should help companies continue to grow even with weaker demand.” The complete article is available here: http://fortune.com/2014/12/02/oil-prices-us-energy/

Overall it appears that the decline of oil prices is attributed to basic supply and demand. Either way, our cash for cars business is a beneficiary. A junk car buyer and scrap car hauler would be happy to see this pattern continue. We buy junk cars in the areas of Bratenahl, Chagrin Falls, Mayfield Heights, South Euclid and Cleveland Heights. Additionally, we pay cash for cars in Solon, Twinsburg, Walton Hills, Northfield and Oakwood Village. Is your car sitting at a repair shop in Euclid, Garfield Heights, Eastlake or Parma Heights? Do you have a non-running vehicle in need of a scrap car hauler in Lakewood, Linndale Village, Newburgh Heights, Parma or Seven Hills? Residents of Beachwood, Bedford, Bedford Heights and Bentleyville Village are encouraged to contact our junk car buyer 7 days a week at https://www.clevelandscrapcars.com. Get cash for cars and free towing of your junk car or scrap car in the areas of Glenwillow, Aurora, Collinwood, Sagamore Hills and Pepper Pike today by calling us at (216) 282-JUNK. We buy junk cars with the vehicle title and a photo ID throughout North Randall, Macedonia, Lyndhurst, Cuyahoga Heights and Highland Heights as well.