The Oil Industry and the Factors that influence Oil Prices – Chapter 10: Conclusion

This is chapter number 10 out of 10. Read the rest:

Read The Oil Industry and the Factors that influence Oil Prices – Chapter 1: History of the Oil Industry
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 2: Oil Prices Determinants
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 3: The Sentiment of the Market
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 4: The Origin of Oil and its Composition
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 5: The Drilling & Production of Oil
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 6: Comprehending Price Fluctuations
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 7: The Supply of Crude Oil and Its Prices
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 8: The Components of Gasoline’s Retail Price
Read The Oil Industry and the Factors that influence Oil Prices – Chapter 9: When Supply and Demand isn’t the answer

Fundamental economic theory states that in a free market, the price of a commodity is determined by the laws of demand and supply. From a theoretical point of view, this is true. However, in reality, there is a myriad of other factors which can influence the price of oil. Expectations also play an important role in determining the price of oil. Nowadays, widespread trading in financial derivatives also makes the determination of oil prices more complex and speculative.

Furthermore, oil prices are also affected by the sentiment surrounding its availability of supply. News of war, geopolitical tensions can easily move the price of crude oil even though its supply remains stable. Thus, the market perception alone can affect the price of crude oil substantially.

Most good brokers or banks can supply you with the latest oil prices.

The global daily consumption average about 84 million barrels per day. According to the Government Accountability Office, this consumption level is estimated to rise to around 118 million barrels per day by 2030. Our surplus production rate is currently just around 500,000 barrels per day. This figure represents just 0.6% of the above uses rate. Thus, any disruption to the supply can cause an increase in demand.

With the geopolitical situation in theMiddle Eastbeing so unstable, many people are encouraged about the stability of the supply of oil. In addition, the value of the US dollar is no longer like what it used to be due to the deficit of theUSgovernment. TheUSgovernment is currently facing a $9 trillion deficit and this has eroded the confidences of businesses in using the dollar as the medium of exchange for trade. Previously the Canadian dollar is worth less than the US dollar but nowadays its value has overtaken that of the US dollar. Experts are predicting that with the current economic situation in theUS, the dollar is set to devalue further.

Although proven oil reserves indicate that we will have enough oil to last us for next few decades, we will ultimately exhaust these reserves as well. This means that the pace to look for a substitute for oil needs to be quickened. Already mankind is aggressively looking into technological advances to harness the power of renewable energy like solar, wind and geothermal. Unless we can learn and manage to break off from our dependability on fossil fuels, we will become hostage to chaos that will ensue when the global oil reserves runs out.