Crude Oil, Not Just Your Basic Oil

Humble Beginnings:

Fossil fuel, natural fuel formed from the remains of once living organisms, has been around for centuries with coal being the most common and harvested form at the time. This would all change with the discovery of a new form of fuel.

The Industrial revolution, a period that saw the revolution of power in the form of steam ships and railways, and the mechanization of agriculture, gave birth to what we know today as crude oil. Its discovery has changed the way we work and has become in demand because of its use with newly invented machines.

Price Determinants:

Oil’s stature as an in demand global commodity is sure to experience major price shifts and have a great impact on the economy. There are two primary factors that impact the price of oil and these:

  • Supply and Demand
  • Market Sentiment

However, the price of oil is actually set in what is called oil futures market. Futures are financial contracts that require the buyer to purchase the asset and the seller to sell the asset, such as a physical commodity at a scheduled future date and price. And unlike other products, the price of oil is not solely determined by the supply and demand. Rather, it is the supply and demand of the oil future contract that plays a central role in price determination. But no matter how the price plays out, it will continue to be in high demand thanks to its use in fuels and countless consumer goods.

Negative Effects:

Despite use in the economy, overreliance on fossil fuels can have drawbacks on the environment and the most recognized environmental effect is global warming. Another risk is seen in the oil drilling, the process by how oil is extracted, which causes oil spills and the acidification of the ocean. These adverse effects of crude oil have caused manufactures to begin creating products that do not rely on crude oil but on alternative sources of energies like cars that operate with the use of electricity, solar panel powered homes, and wind powered turbines.

As a Commodity and Stocks:

Crude Oil has a ticker symbol of CL and since its discovery during the Industrial revolution, the world economy has become increasingly dependent on fossil fuels such as crude oil and its demand has also sparked political unrest due to a small number of countries controlling the largest reservoirs.

Because of its contributions in modern life crude oil is seen as a valuable commodity with numerous uses. Back in 2008 oil prices were at an all-time high at $144/barrel but plummeted during the financial crisis of 2008. It was able to make a rebound by mid-2009 to 2014.

Despite the shift in price crude oil will continue to play an important role in everyday life because of its demand and uses.

1 Response

  1. sc:ievrInsultare sembra diventato l’hobby più praticato sopratutto da chi si crede di sinistra. Cosi facendo non si va da nessuna parte anzi si aiutano i pseudo populisti e codazzo ad emergere.

Leave a comment