What Causes Energy Prices Fluctuations in the Market.
Fluctuation in energy prices has a significant impact on the economy. It is, therefore, vital to understand the possible causes of the changes in rates so that proper measures can be put in place to manage these conditions. Energy is a necessity as a component of development in the economy. Governments invest a lot in power since it promotes investment and production, which creates employment leading to growth in the economy. Forces of demand and supply can explain the rise in oil prices in the market.
The rise in demand for energy products can be explained by an increase in industrialization, especially in developing nations such as China and India. In the past, the demand has been successfully met by oil-producing countries such as Nigeria and Middle Eastern nations, but this has not been possible in recent years. Production requires energy, which is either non-renewable or expensive to produce. For instance, oil is one source of energy that is readily available, but it is non-renewable, electricity, on the other hand, is expensive to produce. The availability and nature of different sources of energy affect its supply in the market, which, in most cases, does not meet the demand.
In conclusion, energy is a crucial component in production, which explains why demand increases with an increase in industrialization. Monitoring the fluctuations in demand and supply is vital as it affects the economy. The scarcity of energy components makes it difficult to meet the need of the product, which causes the prices to hike. The rise in prices of energy is attributed to the forces of demand and supply in the market.