Dealing With Oil Prices

There seems to be no end to the troubles of oil. The oil prices are shooting up and they rose to the peak point this week. Along with the increase in price, the gasoline stockpiles decreased sharply as well.

The demand for such supply is increasing as more and more people are consuming oil at an alarming arte. The need of the hour is to control the indiscriminate use of such oil products because if we continue its use like this, the future generation is in grave danger as they may not be able to enjoy the pleasure of using oil and oil products.

America is not only the largest importer of oil but they continuously top the charts for maximum consumption as well. There is a lot going on in the oil industry. The tension with gulf countries like Iraq is forcing people to try and keep their oil stocks intact as if a war breaks out, the oil supply may be severely disrupted and thus a lot of countries may face a lot of problems.

Despite the high end price of oil, the demand is still there in the market. Thus, people need to come together and decide what steps should be taken to take care of such problems. We cannot let the oil prices to keep soaring so high as the world fraternity as a whole would suffer badly owing to it. There needs to be a judicious supply and justified prices, but at the same time, people need to understand that oil should not be used indiscriminately.

If we follow all such steps and chart the right strategies, may be this problem of oil prices and oil demand gets tackled. Right now, the world is troubled with the tough issue of managing the oil prices and we can only hope that things get better.

Oil Prices fall as Pipeline Explosion News Denied

Saudi Arabia on March 2, denied an Iranian scare of an explosion in gas pipeline. The denial led to an increase in oil prices taking it to $108 a barrel. On March 2, benchmark crude up for April delivery was at $107.89, which shot by $1.77 and reached $108.84 a barrel in New York.

In London the Brent crude was at $124.74 per barrel, low by $1.46, on the ICE Futures exchange.

Before the Saudi Denial Crude had leaped to $110.55 on Thursday after there was a report from an unconfirmed Iranian source of an explosion in a pipeline; which Saudi officials denied later.

Last month the oil prices were near $96 amid apprehensions that Iran’s nuclear program policies might disrupt the oil supplies through the Strait of Hormuz. On one hand the US and Europe are imposing tough sanctions on Iran, while on the other hand, Middle East countries are threatening to cut oil supplies, by halting oil tankers that pass through the strait.

Israel is planning to test a new ballistic missile soon; the Israeli Prime Minister is also scheduled to meet the US President to discuss the Iranian issue.

Recently Commerzbank, Frankfurt reported that the crisis in Iran is one of the prime causes to trigger off the oil prices early this year. Concerns regarding supply disruption, the report added might persist for some more time, thereby giving way to a long standing risk premium on oil prices.

Adding further to thy increase in oil prices is the recovering US economy, with investors looking at crude optimistically, and also due to the lurking Iran fear. On Thursday, the government said that application pertaining to unemployment benefits have sized down, with a parallel rise in spending on construction of residential properties. Retail sales have also strengthened in February.

While few analysts feel pessimist about the gasoline prices, favoring economic recovery, others are optimistic about it too.

Oil Price Rise – Economic Perspective

Oil price rise can be for good or bad. The current rallying of prices is indeed bad. Dealing with such price rises would rather be difficult for the governments and banks.

At any given point of time, using any sort of price marker, the oil news is just not good for a consumer. Since 2008, Brent crude touched highest levels to reach $130 per barrel overnight. US crude was at $110 per barrel, before it came down to $108. If these price rises were due to shortage of supply, or an increase in demand, it would have meant an upswing economical motion.

But the present case is vice versa, it is the short supply to the not so increased demands yet that is controlling the situation. Iran’s nuclear ambitions along with a denied Saudi explosion of pipeline have aggravated issues.

If the price rise would have been an outcome of increased demands, it wouldn’t have stifled growth, because high prices could have been matched by raising the labor prices. A supply shock affects the disposable earnings just like taxes do. It leads to a reduced demand, thereby weakening the economy.

The problem with oil markets presently is that in number of countries there are events that have a huge impact on supply and demand, thereby triggering instant reactions from the traders, giving way to speculations and volatility.

The recent pipeline story for instance points towards an obvious nervousness sin the oil markets, or anything that relates to the supply issues.

The US has been restraining Asian economies especially to reduce oil imports from Iran. They are of the opinion that other oil producers in the world are fairly placed to take care of any shortfalls. Some analysts also feel that with change in weather conditions, and with summers approaching, oil prices might soon receive some checks.

Wall Street Slips, Oil Doesn’t

Stocks in US edged remarkably low on March 2, 2012. The S&P 500 along with Nasdaq however maintained pace, exhibiting a positive performance for eight out of last nine weeks. Investors kept a close eye on oil prices too, which have been on a rising spree since February. Crude oil in US witnessed a fall by 2%, and reached $107 a barrel after it hit a ten month high of $110 per barrel. This fall came as Saudi Arabia eased concerns over pipeline explosion. This news had pushed Brent to remarkably high levels since 2008. The news about the pipeline fire came from media in Iran.

The recovering economy might get damaged by steep oil and gasoline prices, since consumers will be forced to cut on their spending. The director of equities, Kayne Anderson Rudnick in LA California – Doug Foreman said that in case there is a noteworthy event in the Middle East with Iran, there might become a factor for change over a short span of time.

The US President’s aides and that of the Israeli Prime Minister are seeking a middle way out to the differences. The heart of the concern primarily is that Israel might attack Iran’s nuclear sites. This has resultantly led to a spike in the prices of oil remarkably. Both the leaders are scheduled to meet on March 5.

The fear that renewed tensions in the West with Iran might lead to a disrupted supply of crude oil through the Hormuz Strait, thereby spiking off the oil prices further. Since the beginning of 2012, oil prices have swelled up by about 15 percent.

The increase in crude oil demands especially from China and other such emerging economies are among other stable pressures on oil prices. The US President, Obama has at various points recognized this concern too.

The Story Of Rise Of The Oil Industry

Oil industry was once the most profitable industry owing to the fact that countries all over the world need lots of oil barrels to meet their energy demands. Hence, oil was one of the most imported products as despite the high prices, countries needed to import oil barrels.

Oil finds it use in a lot of day to day routine works. They are needed as fuels in vehicles in airplanes so naturally; all countries would need to stock ample supply of oil if they do not want to upset the regular running of various daily activities.

Hence, oil industry was one of the most profitable ones as the gulf countries cashed in this situation and earned lots of revenues. However, market analyzers are of the opinion that in the year 2012, the oil industry can face a major setback as the blows of recession are going to hit them hard. A lot of factors, logics and trends have been taken into consideration before coming to this conclusion.

The experts at analysis have come to believe that both demand and price for oil barrels are likely to hit a low after the recession. However, there is nothing to be pleased about. Since, dealing with oil problems along with recession woes might be a huge task. Not only would the gulf countries suffer due to this oil setback, but the other nations too would be at a loss because despite slashed prices, they would not be able to derive benefit from the situation.

So, it is not the right way of reducing the oil consumption and measures should be taken to keep this setback in check. One ray of hope that emanates from this entire situation is the fact that the net oil consumption is likely to go down which can help as the natural reserves of oil are at the danger of being exhausted completely.

Will Recession Blow Be The Blessing In Disguise?

There has been a lot of speculation regarding the fact whether or not the oil industry would succumb to recession in the year 2012. While most of the countries are battling their own problems with recession, the trouble with oil might just prove to be the last straw. Whether or not the thesis turns out to be true is a tale that shall only unfold with time, however, right now the situation is not extremely bright as the prospects do not look to be very promising as far as the oil industry is concerned.

The gulf countries and those having huge natural reserves of oil are in deep trouble as oil has always been their main source of income. They have extracted huge amount of profits by exporting the precious oil reserves present in their country. However, with the supposed slash of demand as well as price that is likely to hit the oil market, things might not be so rosy for these countries anymore.

Although, one cannot assert that there would be total end to oil exports since the fact that oil is needed for a lot of day to day jobs makes keeping a certain supply necessary. Yet, there is sure to be a slash in the energy consumption rates of different countries. America has topped the energy consumption chart for too long consistently. 

The world was facing the danger of complete exhaustion of oil reserves in the near future. A lot of conventions have been called in support of cutting down energy consumption without much effect. With this drastic and unwanted slash in demand, one can hope for improvement in the indiscriminate oil consumption rate. Although, this is not the right strategy of cutting down oil consumption, yet it might prove to be a blessing in disguise.

However, for all this to happen first the thesis needs to turn true!!!

Recession, Falling Demand And Slashed Price

A lot of people and market analyzers are of the opinion that oil prices are likely to take a dip in 2012 as even the oil industry is sure to be affected by the hard hitting blows of recession. After analyzing a lot of points and details, the analysts have come to this common conclusion. They believe that along with the price, the demand for oil is also likely to dip drastically. There is a saturation point for all the industries and it seems that oil industries have reached the saturation limit.

After making unreasonable amount of profit for the last years, the oil industries need to remain a bit quiet for some time. It is not that there would be zero demand since oil is required for daily activities. All the vehicles and air planes need oil for running, so definitely all countries would be in need of oil. However, the rising demand is likely to fall down owing to the blows of recession. 

With lots of countries failing miserably at the financial market, bearing the oil expenses might be too much. This can lead to decrease in oil demand. As we have always known, demand and price are always related and so the experts of market analysis believe that this falling demand would hit the oil industry severely as the prices will be slashed accordingly.

What actually happens remain to be seen, however, so far the logic seems to be exactly right and there is no reason as to why this should not happen! One thing that can make the whole theory go awry is if the recession subsides easily and countries recover easily from this supposedly big recession, then the whole theory of low demand and price slash would fail entirely. But, seeing the bleak future, swift recovery from recessions seems to be a fairytale.