I thought the reason they were increased is so we could get the same power with reduced supply?
However a fair few power companies are reaching ridiculously high record profits, which goes against the grain of that idea.
In: 16
Oil companies sell oil.
Oil is a commodity. The price of oil is based on what people are willing to sell it for and pay for it.
If 2 oil sellers have 40 barrels of oil each, and people want 100 barrels of oil, nobody wants to have no oil, so they bid more for the oil. They can pass the cost on, because their customers need oil too.
If there isn’t quite enough oil to go around, the price goes up disproportionally because it’s much better to pay more than it is to get nothing.
The opposite happened recently, when covid started. Oil prices dropped below $0 because there was too much supply. It may sound like an amazing deal to you if I offered you to take $3 for every barrel of oil I gave you, but that oil needs to be transported and stored. The cost of the oil itself is just one piece of the puzzle.
So, prices are driven by the relative supply and demand. Things that control the supply also control the prices, which can manipulate the market for oil. OPEC has a long history of adjusting oil production to maintain prices for example.
Latest Answers