Crude Oil Prices and the Global Economy

Crude oil prices are inversely related to the US Dollar index. US Dollar may not be the strongest of all currencies but it is a very vital player in the world market. The Dollar cannot be predicted.

Global economy is going at a slow pace and inflation is even soaring. In these conditions world economy will not be faring comfortably. Analysts forecast a deep recession in the coming future which might lead to a global economic collapse.

The forecast for 2009 for crude oil is that it will bring smiles on the faces of the people. But is it really the case? Will crude oil really present investors with a golden opportunity in 2009? As per the The Market Oracle, China and other emerging markets are eyeing the fall in crude oil price to utilize huge trade surplus foreign currency reserves to buy up crude oil reserves exposure wherever possible, this has resulted in less of a decline for oil majors stock prices despite the 70% oil price crash. This shows that the happiness will be shared by a few countries only and not by everyone.

Paris-based International Energy Agency (IEA) –energy advisor say that oil will rise to $100 a barrel by 2015, as a result of a major supply crunch. In any case the demand is going to rise in the coming future and the long-term trend in this case says that future for crude oil buying may be at a way higher price. The global downturn caught up with crude.

The current dipping prices are even not a happy moment. “This is a global phenomenon,” said R.S. Sharma, chairman and managing director, ONGC. “It is bound to squeeze the profit margins of all oil producers the world over.” Refiners even feel the pinch as oil prices drop.

The relation between crude oil and global economy is usually direct. It’s like when u have money the prices are high and when u don’t have enough money the prices are lower. Even Business Standard, a leading newspaper stated that Crude oil futures decline on weak global trend.

“In terms of the relative value of products, we are more positive on gasoline,” said Yingxi Yu, a manager for commodities research at Barclays Capital in Singapore. Organization of the Petroleum Exporting Countries (OPEC) members are expected to cut oil production when they convene in March to try to push up prices to at least $70 a barrel, Iraq’s oil minister said. Vietnam Oil and Gas Corporation (PetroVietnam) announced that Vietnam will decrease crude oil export by 3 million tons to 11.68 million tons this year, the local newspaper Vietnam Economic Times. The big and powerful countries like US, Europe and Japan are even looking to cut global energy consumption.

Concluding line from my side would be that the world is not ready to handle the condition of crude oil and if it is not handled properly then it could prove to be crude ‘CURSE’ oil.