Since crisis is defined as a sudden unexpected happening that hurts people and economies, it can said that the oil issue has turned into a crisis.
Firstly, let’s evaluate the situation in the United States, the biggest oil consumer in the world. That oil prices which hit a record $46.91 per barrel went down a little bit, was welcomed with delight. However experts say that this decline is temporary. The New York Stock Exchange is being shaken by oil news. Investors are selling technology shares and buying oil company shares. A great many investors have changed their long-term portfolios to do business in the oil sector. Hence, the investment atmosphere has become suitable for speculation. The speculators who sold at over $46.91, bought shares when the prices fell, making enormous profits in the process; however, they confused the market. Anyway, speculators and instability are components that feed each other. Japan, the second largest economy in the world, and relies almost wholly on imports for its needs, has also begun to suffer losses. The yen has fallen against all other major currencies. Crude oil futures prices have risen to record levels at the Tokyo stock exchange. In Germany, authorities have stated categorically that oil price hikes will affect growth rate negatively. Even worse though is that the supply and demand balance indicates the crisis process will continue. Following threats by Shiites to destroy oil infrastructures and pipelines, Iraq temporarily halted supply. This unfortunate country, reeling under war and occupation, now even has difficulty reaching the pre-war level in oil production and marketing. Even though [President Hugo] Chavez won a referendum on his rule, Venezuela, the fifth oil exporting country in the world, is still far from stability. Nigeria, another important oil producer, is plagued by internal strife. Coming to Russia, this country halted its foreign debt repayments in 1998 when crude oil prices plummeted to $9. In 2000, when prices rose up to $20, it repaid all its foreign debts with ease. Russia, whose economy depends mostly on oil exports, must now be very happy with the price hikes. The possibility of increasing the daily production capacity in the world is currently limited to 1.5 million barrels per day and most of this can only be supplied by Saudi Arabia. This amount is very low compared to the world’s daily consumption of 81.4 million barrels.per day. According to experts, never has there been a time that oil-supplying regions are facing so many problems. In addition to this, al-Qaeda is threatening oil producing regions. In the demand front, growth continues despite a15-percent expansion in the last 10 years. In the immediate future, there appears to be no development in the world that would decrease demand. On the contrary, the global demand is expected to increase 3.2 percent by the end of this year. In the meantime, there is an issue of curiousity: Can the opening new oil wells increase production?. Realities do not give hope on this issue. This is because on the average, oil can only be extracted from one out of four new wells that will be opened. Then it takes at least 18 months to be able to extract oil from one well. For additional production to meet the world’s entire demands, thousands of oil wells have to be opened. In a word, it’s just impossible. What will be the effect of the newly started crisis on Turkey? In the short run it is inevitable that our oil costs will increase. However, in the medium and long run, as the increasing oil prices exceed the costs, there is a serious possibility that the cost of drilling and extracting activities will become cheaper.