Are you tired of reciting your glory days to youngsters when you paid less than a rupee to travel and still had enough to spare to eat to your heart’s content?  Well, with the way prices are increasing it is unlikely those days will ever come back. Living in Nepal, empirical evidence might suggest to you that oil prices flow in only one direction, up. However, the global price at which NOC buys at does go down at times, and it looks like oil prices might slump further given the current global situation. Of course, the fall in global prices will probably have no benefits for the Nepalese population in general, but it shouldn’t surprise you if NOC suddenly recruits more staff or pays out a hefty bonus while simultaneously lamenting over huge losses.

Oil prices have historically been a good indicator of economic performance. During times of economic prosperity, oil demand generally increases.  During the last global recession, 2008-2009, oil fell to around $40.Crude oil has extensive uses in the modern economy and many analysts have concluded that the modern economy is oil dependent. Crude oil is used for purposes such as creating plastics, black topping road and even for fertilizer production. So the recent fall in oil prices are actually a bad sign as far as the world economic health is concerned. From the supply side, Saudi Arabia has been increasing production and peace talks with Iran have somewhat cooled off market panic about a possible supply bottleneck resulting from oil sanctions on Iran.

However, according to some analysts prices around $90 is Crude Oil’s support, and prices are likely to rebound although a sharp increase in unlikely given the current economic outlook. Recently ECB’s refusal to commit to Spanish banks has compounded the Euro crisis and markets attention has shifted to Spain. Spanish contribution and debt to other countries in the Euro Zone is much larger and therefore will affect the Euro Zone more than Greece. Thus, the fall in oil prices might be good news for some, but indicates growing fears in the market of a coming crisis.