by Leonard Konis

Created on: April 14, 2008

Formidable the price of crude will reach record highs in the future. No doubt mountable reasons for crude oil price increases will be sustainable as current and future supply demands out - pass supply availability: Especially global demand and premium price reflective of oil market traders concern regarding risk for supply disruptions. 5 Relatively the price of crude today ($108.5) may seem high but inevitably price for a gallon of gas will be substantially more expensive. Supply and demand fundamentals directly influence the price of crude oil around the world. Consumers already have noticed price increases for transportation (98% of energy consumed for road and transport - dominant forms of transportation 12) , grocery items, electricity (Many electrical plants are fueled by crude oil or natural gas), and many other consumable goods and services: Certainly the price of crude oil will have a domino effect through-out the U.S. economy and constraint upon disposable / discretionary income.

Circumstances influence the price of crude oil:

1.) Price of crude oil is based upon the currency value of the U.S. Dollar. During 2007 and continuing into 2008, value of the U.S. Dollar has steadily depreciated in trading markets around the world. As result, price depreciation of the U.S. Dollar has incurred upward pressure on the price of crude oil. The devaluation of the United States Dollar attributed by a falling U.S. economy and by cutting interest rates. "Many investors see commodities such as oil as an effective hedge (investment) against a falling dollar and inflation." 11: As a result investors or traders will purchase crude oil on commodity exchange markets, fueling higher crude oil prices. When the U.S. economy improves, and demand for crude oil will increase: Currency of the U.S. Dollar will increase, virtually having no influence to lower the price of crude oil as supply availability could remain unchanged or possible decrease, and formidable increasing crude oil prices.

2.) World demand for crude is substantially increasing especially in China and India, where the economies of these countries are experiencing record growth and forecast further expansion: Consequentially increasing demand for crude will influence higher crude oil prices. "The International Energy Agency has projected that China and India will account for 45 per cent of the increase in demand for oil between now and 2030. India imports 70 per cent of its oil." 1 Also, the International Energy Agency

• 1
• 2
• 3
• 4
• Next Page >>