CAUSES OF RISING GLOBAL OIL PRICES

Causes of rising global oil Prices

Causes of rising global oil Prices

Introduction

The oil price volatility is a dominant factor in the global economy. World According to analysts, the war between the U.S. and Iraq had one of the reasons security of the oil business, linked to the influence of this source of energy in all production activities. Crude oil has always been an important element in diversifying portfolio. This benefit has increased further historical diversification in 2009 / 2010. With the U.S. Federal Reserve pumping more money into the system, the price of oil is likely to head higher which can provide improved performance by investors, in addition to reducing the volatility of the portfolio in 2011. Due to the inability to invest in the physical oil, investors, both institutional and retail, have shown great interest in various oil and natural gas-based funds. Most of these oil and natural gas fund (ETF and ETN) have a mandate to track crude oil / natural gas prices and invest in oil paper (financial settlement of contracts).

Discussion

Crude oil supply has played a tremendous role in increased oil prices

One of the most important factors for increasing oil price is the supply of crude oil. Traders and speculators can earn from these changes in values through purchasing or selling Crude Oil CFD's (Kanter, 2008). Over the long term, Crude Oil is likely to go after strict lines of trend, and if one could classify a trend appropriately then it is possible to get earnings from those moves by selling "short" or purchasing "long" oil prices. The rise in the prices of crude oil guides to explore oil in new regions and superior techniques to extract crude oil; however, this is relatively costly and difficult. However, crude oil is produced in the U.S. and the crude oil is imported from key crude oil producing nations to fulfill the increasing requirements. In the month of January 2010, U.S. had imported 67% of crude oil from Canada, Mexico, Saudi Arabia, Venezuela, and Iraq.

The war in Iraq has increased oil prices over the past years

It is a fact that due to the war against Iraq the oil prices have increased immensely. If we look back at the past, it is evident that soon after the attack on Iraq, there was a sudden increase in the per barrel oil prices. As a consequence of increase in ...