Crude oil prices are the most important commodity prices in the world. They receive a tremendous amount of attention from just about every type of investor. No matter if you are managing your own small investment portfolio or managing billions of dollars in a highly leveraged hedge fund it is likely that you will be following crude oil prices.
The careful attention that crude oil prices receive is understandable given that the products derived from crude oil are the life blood of the modern world’s industrial economy. Crude oil is the raw material material input to products, such as gasoline, jet fuel, and plastics, that are essential to a modern way of life. The price of crude oil is quickly reflected in the price of these many products. It’s no secret that the availability and price of crude oil is something that one way or the other affects nearly every human being on planet earth.
Crude oil is a finite natural resource with current supply and demand factors closely balanced. The future prospect for both the availability and pricing for crude oil looks to be ominous indeed. As countries like the United States continue with wasteful energy habits, and rapidly developing nations like China and India add more automobiles, larger houses, aircraft, and oil dependent uses of all kinds to their development mix, the pressure of increased demand against declining oil production around the world will cause a huge permanent increase in crude oil prices.
The easiest way to keep up to date with the daily crude oil price changes in a way that makes immediate sense is with a crude oil chart.
The following chart tracks crude oil prices live as they trade on world markets. The chart can be quickly changed from a one month chart, to one quarter, to one year, to five years, just by clicking on the indicator at the bottom of the crude oil chart.
While not suitable for in depth research the crude oil chart will give you a good quick idea as to the direction of the crude oil market. Since crude oil prices provide so much input into the functioning of the world economy no other commodity price level is as closely watched and no commodity is as vital to economic activity.
The very volatility of the current crude oil price is a strong indicator that the world economy is not functioning well and that the world economy as we have know it is at serious risk.
The current crude oil price is setting the stage for a huge price spike at a later date, probably not that far into the future.
The media has made much of the oil price decline from $147 to a current level below $40.00 a barrel. The emphasis has been placed on worldwide demand destruction due to the slowing world economy and the outright financial meltdown in the United States. Actually, much of the tremendous drop in oil prices is due not to supply and demand considerations but to the forced liquidation of crude oil futures contracts as margin calls over powered hedge funds and large investors who had used excessive leverage to position crude oil contracts on the way up in price.
As oil prices fell along with almost all asset classes forced liquidations by large investors caused a death spiral that was self reinforcing. The unrelenting feedback loop caused by deleveraging was impossible for many over leveraged operators to pull out of. They had to sell good positions along with the bad.
While under present demand conditions some demand destruction has surely occurred the current crude oil price has likely overshot the mark on the downside. At current oil prices exploration projects are being shelved and alternative energy projects are being abandoned. The current crude oil price is probably not going to last long. While demand has declined in fast growing economies like China, India, Russia, and Brazil the sheer numbers of their people moving up the economic ladder into middle class status will drive oil demand as they purchase automobiles and use a lot of energy produced from crude oil resources.
