Prices of commodities in the energy industry are often subject to fluctuate. The most significant factor that influences pricing trends of energy commodities is the health of the global economy. For example, economic uncertainties in the past couple of months have caused the decline in the price of oil. According to the Wall Street Journal, “economic risks and the return of Libyan output have sent oil prices under $100 a barrel” (1). A staggering economy will decrease the demand for energy because businesses will have to limit their production. After political turmoil hindered oil output in Libya earlier this year, oil exporters have returned to the global market and enhanced the supply for oil. Prices for oil have fallen because the demand is diminishing and the supply is increasing. That being said, commodity prices should move upwards when the economy revitalizes itself because demand for energy will be greater.
One major non-state organization that tampers with the price of oil is OPEC (Organization of Petroleum Exporting Countries). In response to the declining oil prices in today’s economy, OPEC is considering stepping in to stabilize prices (1). By creating a price floor, oil prices would remain at a relatively high cost and keeping competition in the market healthy.
While natural resources are generally bought for energy purposes, they are also trade as commodities on open stock markets. Seasonal changes usually affect the pricing for commodities in the energy industry. Extreme seasons of weather, generally in the winter or summer, will create high demand for natural gas and oil. According to the Wall Street Journal, stockpiles of natural gas increased this past September (2). As supply of the commodity rose, prices are intended to go down. A variety of factors influence the trends of pricing in the energy industry. Most importantly, a healthy global economy and sufficient supply of commodities will drive up demand and lead to price increases across the board.
Sources:
(1) http://online.wsj.com/page/mj-industries.html?collection=DEN
(2) http://online.wsj.com/article/BT-CO-20111006-708254.html
There was a line of dialogue in the movie The Social Network in regards to Eduardo Saverin making $300,000 predicting oil prices because he studied meteorology. I found an article relating it to many types of businesses: (http://www.inc.com/articles/201103/outsmarting-mother-nature-and-targeting-consumers.html)
ReplyDeleteIs it possible the line of dialogue could hold some credence?
The fact that the price and abundance of natural resources affects the price of some energy products could be a scare to make people who speculate about the future of energy. I found this article from the Economist speculating on the future of energy in our society and throughout the world. there is a clear emphasis on green energy and whether or not we will create enough of a technological advancement in the field of green energy before we have a problem finding enough natural resources to compensate for our ever-growing demand for energy.
ReplyDeletehttp://www.economist.com/node/11580723