A Brief Note On Rising Oil Prices And The Falling Currency

Currently Saudi Arabia is one of the leading producers of oil in the world. However, it is losing its foothold on the market. Many countries, like North America, are increasing their oil production and are looking for ways to become less dependent on foreign oil. The increased competition has caused oil prices to decrease. By producing their own oil, countries not only will increase their revenues, but will also reduce their need to rely on foreign oil. By reducing their need foreign an oil a country does not have to worry that their oil supply will be cut off if they go to war.

When trading oil it pays to keep an eye on the major consuming nations, as any increase or decrease in usage is sure to have an impact on the commodities performance. Something that is also worth monitoring – with this tying into the performance of major consuming nations – is OPEC, the Organisation of the Petroleum Exporting Countries. This international organisation works to ensure both the stablisaiton of the oil markets, along with coordinate and unify petroleum policies. Current members of OPEC include mass-producing oil nations (13 in total, including Saudi Arabia, UAE, Iran, Iraq, and Qatar). Considering that OPEC has the power to decide policies related to the production and sale of petroleum oil, it certainly has the power to impact the price, flow, and distribution of oil worldwide.

Oil-The article”OPEC #1”explains the oil prices.The Oil of the Middle East is the price of oil has fallen by nearly half in just six months.Anyone who buys oil or gas is happy because the prices are low.Car and truck drivers, airlines, and shipping companies are all happy because they don't have to spend as much money on gas. Oil companies are not very happy. They are losing money.A barrel of oil now costs $58 and last summer it was $107.Oil prices have gone down and people are happy,at least some of

Oil is a limited commodity with an unlimited demand. Very few nations have the luxury of having their own supply to which they can fulfill their own needs, while other countries clamour for what they can get . The countries with oil realized instead of competing with one another on exports , it would be much more profitable to simply work together and cooperate in their production of oil, rather than compete. In doing this, these countries will then be able to influence the market magnitudes more.

Suppliers of oil including Saudi Arabia, the United States, and now Iran are producing massive amounts of oil. Because they are producing enormous amounts, we can say that supply has increased causing a great reduction in price per barrel or oil which affects gasoline. We

With many of Europe’s economically struggling countries the increase in production of oil which in return yields lower prices has benefitted them. Europe’s weak economy is able to contribute to this drop in oil prices in that Europe’s currently low inflation rate and weak economy has greatly lessened the demand for oil. The lack of demand for oil in one of the most prominent import continents in the world has forced oil manufactures to lower their prices in order to retain Europe as a top oil export. Large oil exporters do not want to lose Europe as an export because that would also mean losing billions of dollars per year.

The recent drop in the price of crude oil by more than half since June 2014 involved complex causes, but much of the problem stemmed from an imbalance of supply and demand. The oil industry thrives on advances in science and technology and historically has proven remarkably adept at producing knowledge and techniques to locate, process, and transport oil but ill-equipped at using its investments into industrial research and development to create market stability. For example, American energy production has boomed in recent years due to advances in hydraulic fracturing and horizontal drilling but those innovations created vulnerability for American oil producers and particularly for smaller independents when world production outpaced consumption and prices dropped.

As crude oil is invoiced in USD, it is of interest to note how fluctuations in the value of the USD affect oil prices. Another of our factors is the price of natural gas, the closest substitute as a source of energy to oil. Lastly, we seek to establish a relationship between returns in the S&P500 and oil prices.

While the first article I concern myself with predicts an increase in gas prices, the second article confirms an increase in the price of oil. From the onset, the first article, titled Increased Gas Prices? Don't Blame Unrest in Egypt, points out to readers that they could soon find themselves digging deeper into their pockets for a gallon of gas. However, even though it acknowledges that the unrest in Egypt could be to blame for the increase in gas price, it warns against apportioning all the blame to the said unrest. The second article, titled Market Watch: Oil Prices Rise on US Economic Outlook, confirms an increase in the price of oil most particularly in the London and New York markets.

Is it true what experts say, when the price of oil drops the economy gets better, and when the price of oil rises the economy suffers? Of course as consumers we love to pay less at the gas pumps, but as we play much less now for gas then we did last year many of us are suffering due to the dramatic drop in the price of oil. As I strongly agree that the low cost of oil is hurting the economy in general, as I was one who fell victim to the recession working for an oil company up until January 2015, but fell victim to lay off due to the big drop in prices.

The modern world of today runs on fossil fuels with crude oil being the live blood of industrialized countries. Though much of the twentieth century old was plentiful easily acquired and low in cost it has only been in the past thirty years that we have seen oil prices rise substantially. This can be attributed to many different reason. These price changes have challenged the industrialized world to become more creative with their techniques of both acquiring oil and using it.

What affect does the price of oil and gas have on the economy? How does this affect the daily lives of the entire population? The preceding questions are the basis for the enclosed report. The primary objective of this report is to give a few reasons as to what causes prices of oil and prices of gas to rise. Among these reasons, speculation of things that may or may not happen, like a terrorist strike, is one of the leading factors. Another reason for the continued rise in prices of oil and gas is the constant growth that China is experiencing in population and energy consumption.

·     Opec aims to keep oil prices within the agreed band of US$22-US$28/bbl (www.opec.org). However, with crude oil now ‘…standing at close to $33 a barrel…’ (www.bbc.co.uk) near a 13-year high, Opec considers increasing its target. With a tight US gasoline market, low inventories (The Guardian 27/04/04) and an upsurge in fighting in Iraq (http://news.bbc.co.uk), oil prices look likely to remain high or rise. Ryanair faces persistently high or rising fuel prices. (Source: http://www.guardian.co.uk)

Oil is a scarce commodity that is extracted from deep in the ground and it is not available everywhere. It is a commodity that has many uses and as such, its price, supply and demand fluctuate based on the needs of the economy and the market. In addition to oil being used to make gasoline it has many other uses, such as to make plastics, heating for people’s homes, in asphalt, and other things. Because of its many applications, it is a product that is in or plays an important part in our daily lives in one way or another. When the economy goes through periods of expansion, which are periods of economic growth, the demand for oil becomes greater and producers are encouraged to engage in more drilling in order to increase the supply to keep up with the consumption and also to maximize profits.

The purpose of this paper is to explain the effects of oil prices on various parts of the economy. The Impact of Lower Oil Prices by Bruce Lantz and Contemplating Collapsing Oil by Leonard Melman assist in explaining the advantages and disadvantages of declining oil prices. Both articles address the issues of unemployment and changes in total spending caused by the price of oil. Taking into consideration the opinions of chief brokerage and wealth management companies, as well as the actions of various prominent oil and gas companies, Lantz and Melman share their predictions in regards to the outcome of the current oil situation. However, after considering the facts presented in these articles, it seems very likely that these low prices will ultimately become a serious problem. Before delving into the meat of the above mentioned articles, several vital economic concepts must be tackled.