Impact of
global financial crises on oil market
Oil price tumbles to 14-months low on Thursday, is it the end of oil price hike? Or is it an answer to those who never agree with peak oil era? Will the oil price continue to go down?The oil market has no doubt became a victim of various global happening, differentcircumstances forced the fuel price to drop to its lowest level in 14-months and this may continuefor some times.Oil as one of the world most demanding commodity is susceptible to surge or sag in pricedepending on market stability.Currently the world is in a real financial mess. Stocks are crushing, industrial production has beenon declining, millions are losing their jobs, companies are closing, investors are everydaybecoming scared and this has seriously affect manufacturing globally which are 100% oilintensive.This Turmoil in the global financial markets hurt sentiment and reinforced concerns about weaker oil demand growth. Because demand for oil is derived from wishes to use oil to obtain desiredservices. It is not derived from preferences for the commodity itself.The US Department of Energy said on Wednesday that US crude oil inventories had risen by 8.1million barrels in the week that ended October 3, far more than market expectations of a 2.3-million-barrel gain.
The Department of Energy further lowered its forecasts for 2009 global crudeoil demand and the International Energy Agency cut its estimate for demand growth this year by100,000 barrels per day (bpd) and for 2009 by 140,000 bpd.Record shows that in September alone 156,000.00 jobs was lost and this is no more than 22% of job lost globally same months. Hence people demand for oil services must fall sharply.The energy crises and rise in oil price necessitate for global concern for an alternative. Developedcountries intensify effort to manufacture highly oil efficient vehicles, more investment is beingmade on renewable energy which is now over $100billion, especially within US, Europe andsome part of Asia. This measure is significantly reducing oil demand.In general, reduce in oil demand by reducing use of oil services and motivating selection of higher conversion efficiency equipment, hence lower the oil price. For example, gasoline prices influencedemand through vehicle miles and fuel efficiency of vehicles. Vehicle miles is influenced by costper mile of driving, including per mile gasoline costs, equal to the ratio Pg/Mpg (where Pg is thegasoline price), and other costs. Increased gasoline prices lead consumers to purchase more fuel
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