Oil Price and Demand

Oil Price and Demand

In Earlier days man needed Food, Air and Water for Survival but with

the Advent of Time and Technology another very Important Factor was

added to this list that is 'OIL'. The price of oil is of critical

importance to today's world economy, given that oil is the largest

internationally traded good, both in volume and value terms (creating

what some analysts have called a "hydrocarbon economy"). In addition,

the prices of energy-intensive goods and services are linked to energy

prices, of which oil makes up the single most important share. The

word petroleum has its roots in the Latin word oleum, which means oil

and the Greek word petra, which means Rock. As the price of oleum has

soared, the links between fear and petroleum become clear to

economists. Fears of heating-oil shortage this winter helped to push

the benchmark price of crude over $ 55 per barrel, which is a new

record. The spike in oil prices, up by over 60% since the start of the

year, is, in turn raising fears for the global recovery. Oil prices

have gone up by 30% in the past 12 months and are now well over the

$22-$28 target range set by the Opec (Organisation of the Petroleum

Exporting Countries) oil cartel. There are two benchmarks for world

oil prices. One is the Futures contract - an agreement for future

delivery at a specified time; place and price-for the US light crude.

The contract is widely used as a benchmark for determining crude oil

and refined product prices in the US and abroad. Brent crude oil is a

North Sea crude widely used to determine Crude oil prices in Europe

and other parts of the World. Together the light crude futures

contract and Brent crude are used as the basis for virtually every

physical crude oil transaction. The rule of thumb is that a $5

increase in the price of oil sustained over a one-year period lops

0.3% off global growth, according to the International Monetary Fund.

Opec agreed to lift production in June and the 44-year-old cartel is