In the last quarter of 2011 oil
prices continuously rises and this trend continues for further first quarter of
2012. However, in April oil prices start taking u-tern and the price of oil
start falling. This trend is continuous till the second week of June. Till
second week of June oil already has lost its price up to 20 percent. This is a
big downfall of the oil prices. Many analysts try to explain the real reasons
of falling prices of oil. But most of the analysts could not present the solid
reason for the price fall. In this article I want to present my opinions about
the present fall in prices of crude oil and its affiliated products like
gasoline, diesel etc.
It is the basic rule of economics
that prices will fall down if the supply of commodity in the market becomes larger than the demand. This law
could be seen applicable in the market in different shapes. Under the present
conditions this law also holds on the demand and supply of fuel oil. In the
first appearance this reason does not have weight but if you go in details
everything will be clear and you will find the actual reason is the difference
in demand and supply of the oil in the market. Here are the details:
Due to the continuous economic
recession during last few months the economies of most of the countries are
struggling. Every country is trying its best to meet the challenges offer by
this economic slump. Due to economic crisis purchasing power of the majority of the
customers fall down and the people start thinking about their spending. This
thinking creates the situation called pullover of customers in the market. When
this happened it shed adverse effect on the sales of almost all the products in
the market. Some products got big effect while other feels low pressure. The
ultimate influence of this trend converges on the fuel demand because fuel is
the essential thing in manufacturing of the products. When the customers do not
go to the market the sale of commodities fall down which also affects the
production processand when production falls the demand of fuel also fall down
which ultimately affects the prices of fuel.
Same is the case with the oil
prices in the present year. Everyone is thinking to cut their spending to meet
the expenses from their limited means of income. This trend affects the sale in
the market and the manufacturer become more vigilant about the extra production
and ultimately the prices of fuel oil dropped gradually up to the level of 20
percent. In other words economic crisis
is indirectly affecting the prices of crude oil and its related products.
Taking in view the above discussion it is clear that prices of oil will
continue to fall till it reaches the certain level and after that it will start
rising due to the limited supply of the oil by the oil producer countries. It
is the natural process that manufacturer only operates on the certain level of
prices and after that level the manufacturer do not want to produce the commodity because after that level it
become unviable for him to continue the manufacturing process. Same will be the
case with the oil producer countries and they will slow down the production of
the oil and in the result once again oil start raising its prices.
However it depends on that
certain level that how rapid that level of prices reaches. If it reaches in few
weeks that you will see the rising prices of oil in the next month and if it
takes some time than you can enjoy the low prices of oil in the international
market.
Taking in view the situation
experts are advising the investors to invest in the commodities rather than in oil or currencies. For this purpose
there are some good commodities
trading companies which offer their services to the investors to trade in commodities and save their time and
money. One such company is traderush.
This company is working with the motto “Trade
with [traderush] for quick and rapid profits, easy withdrawals.No payment, no
spreads or hidden fees”. One can avail the help of these companies for
making money in the trade of commodities market.
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