Oil prices are usually referred to as the price that is quoted for an immediate settlement or what they call the spot price of either Light Crude traded on New York Mercantile Exchange (NYMEX) delivered in Cushing Oklahoma; or price of Brent traded on the Intercontinental Exchanged (ICE) which is delivered at Sullom Voe. A barrel equated to 42 gallons of oil is highly dependent on its API gravity (American Petroleum Institute), its sulphur contents, and its location.
The majority of oil related products will be traded on an over-the-counter basis rather than traded on an exchange which is referred to a marker crude oil grade and typically quoted via pricing agencies such as Argus Media Ltd. and Platts. Other benchmarks included Dubai, Tapis, and the Organization of Petroleum Exporting Countries (OPEC) basket.
EIA or Energy Information Administration, which is responsible for the collection and dissemination of oil prices, production, consumption, distribution, and energy reserves, uses Imported Refiner Acquisition Cost, the average weighted cost of all oil imported into the US as their "world oil price".
Oil demand is dependent on the conditions of global micro economy. Moreover, it plays an important role on the determining of price. Economists claim that high oil prices cause a large effect on economic growth. This means that the relationship of oil price and global growth is not that stable, although the increase in oil price is often said to be a late cycle phenomenon and needs to be carefully considered when investing.
OPEC, comprised of Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates , and Venezuela , was said to be formed in order to maintain the oil price level that will be beneficial to its members and served as a cartel by most observers. This had its first global impact during the oil crisis the 1970's and continues today to be one of the chief means of controlling the production of oil in many parts of the world.
This event is significant today, as we live in a time when many Third World countries are beginning to increase their demand for petroleum and other oil based products. With so much of the world already dependent on a steady flow of oil and related products, it is a safe bet that any cartel or union related to this industry will have an even greater impact over the next several years.
Graph Of Oil Prices
Oil prices have risen again and this time it has been the biggest ever single gain. They jumped from $16.37 per barrel to an agonising $120. Not only will this have repercussions on investors, but it is yet again to set the daily living cost to a ridiculous rate including petrol, oil and diesel prices hitting the roof.
Back in July, when oil hit its all time high price of around $145 per gallon, panic struck, flights were being cancelled and people could not afford to drive. Airline such as XL even had to call it a day. But since then the price had steadily relieved its self and brought drivers alike some relief.
Analysts have been amazed at the shock of such a big inflation jump in one day. They blame this on the continuing crisis at Wall Street, and it looks as though we should tighten our belts, for a bumpy ride over Christmas and New Year. We have already seen 2 major companies on the brink of extinction AIG and Lehman Brothers, with AIG getting a last minute rescue from government authorities.
Monday's record rise reflected a type of trading fluke. By this I mean that it could be classed as a phenomenon called the short squeeze.
Consumer rights groups are also having there saying, as they are suggesting that with no war threat, pipeline leak, or ship wreck, there should be no reason for the prices to take such a dramatic turn.
As the world is set for more financial turmoil, we can only see things getting worse by the day, as there is no foreseen drop forecast in the near future for oil. As a matter of fact, it is only set to increase, as the November contract also rose to $109.37 a gallon, which is an increase of $6.62.
Bad weather may be an important aspect in the hike of oil prices. Hurricane hit places in America have had there productive facilities brought to a halt, bringing more damage to offshore oil and natural gases.
So where does this continuing inflation leave the world? Well it could be said that equipment should be made more energy efficient, and not use as much petrol or diesel. The new hybrid cars have hit the market, but not yet to a global audience. Maybe the world should look at this avenue, and efficiently market it, as we will one day be short of oil and then can you imagine the prices?
Both Mayoor Patel & Musa Aykac are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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