A liter of water costs 16 lipa, gasoline is still much more expensive

The price of a barrel of crude oil on global markets is the lowest it has been in the last 12 years. This turn of events compared to, for example, 2014, when a barrel cost more than 110 dollars, has pleasantly surprised many, especially final consumers.

However, oil is a commodity whose price primarily depends on the market and the mood of buyers and sellers. Why did oil jump above 100 dollars during the crisis? Because oil, along with gold and the Swiss franc, is a safe haven for investors.

When the capital market collapsed with the failure of one of the world’s most famous investment banks, Lehman Brothers, major global investors were looking for a place to transfer their money to avoid losing it. Oil was the commodity that, due to its role in the global economy, was a logical choice.

If you were an investor with 100 million dollars and you were threatened with losing the money you invested in financial instruments that were actually completely imaginary (for example, CDOs – a collection of imaginary papers based on citizens’ mortgage loans classified into groups depending on creditworthiness), what would you do? You would transfer your money to where it is safe and where it will bring you profit. Oil was precisely that commodity. It even happened that major global players bought oil, filled a tanker, and sent it to wait in international waters until the price of a barrel increased.

When the panic ended, when the financial industry consolidated (to some extent, which still took some time), investors slowly began to leave oil and return their money to the financial market. Thus, the price of a barrel began to fall.

On the other hand, oil is an extremely powerful tool for manipulation, especially geopolitical manipulation. Namely, Russia at one point became too powerful. A price of 100 dollars per barrel brought significant profits to the Russians. By lowering the price of oil, which meant much higher production from the strongest players like Saudi Arabia, too much oil began to flood the market relative to demand, and the law of supply and demand is very simple – when there is too much of a commodity, its price falls.

At the same time, Americans began producing oil from shale. A new threat to Saudi Arabia, the United Arab Emirates, Qatar, and others. American oil began to rapidly enter the market, and the only way to mitigate American influence is to further lower the price of a barrel, pardon, increase production. This quiet production war has been going on for some time, but the Americans are still holding on despite many shale oil producers going bankrupt.

Now we have a barrel price that is just below 30 dollars. Estimates suggest that the barrel could fall to as low as 20 dollars, with some even predicting a price of ten dollars. On the other hand, many experts point out that sooner or later the price of a barrel will again reach 100 dollars, maybe even 200. If oil becomes sought after again as a safe haven, that is, if a strong crisis hits, this will certainly happen. Humanity cannot exist without oil, and that is a fact. Oil drives economies – literally.

And where do we stand in all this? A liter of gasoline at 8.49 kuna and diesel at 7.27 kuna is certainly extremely low compared to those prices from last year or before the summer of 2014 when we paid 11.14 kuna for a liter of eurosuper 95. Today, gasoline is 24 percent cheaper than that summer. The fact remains that a liter of gasoline is cheaper than, for example, a liter of juice (this mostly applies to branded juices, cheaper ones can be found), a liter of bottled water, wine, and so on. Comparisons of fuel prices and certain products in the market have already begun, raising questions about how it is possible for fuel to be cheaper. In the case of final products, we pay more for the brand than for the product itself. A liter of bottled water in stores costs around 5 to 6.50 kuna. A liter of water “from the tap” costs about 0.016 kuna.