Factors Affecting Price of Crude Oil and Natural Gas

1355 WordsFeb 17, 20185 Pages
Factors Affecting Price of Crude Oil and Natural Gas Introduction Over the last few years, the prices of crude oil and natural gas have depicted turbulent rising and falling trend. Changes in these prices are largely determined by supply and demand factors in the global market. The recent financial crisis that occurred in 2008 and 2009 displays poor economic conditions that have led to reduced demand of oil due to poor economic activities among many countries. Presently, the world economy is experiencing a recovery with increased demand for gas arising as a necessary move. This paper addresses the issue of crude oil and natural gas prices, providing an analysis of the existing linkage between individual prices and various aspects having an influence on resulting prices of these products. Relationship between natural gas and crude oil According to economic theory, there exists a close connection between the prices of natural gas and crude oil. This is due to the nature of the products which comes from the same production process but has a complementing use. In this view, the production and consumption of natural gas and crude oil occurs interdependently. However, past situations have showed independent movement of crude oil and natural gas prices. Particular periods occurring in 2001 and 2003 point to the increased rise in natural gas prices beyond the historical connection observed with prices of crude oil. Such differing changes prompt economists to
Open Document