Muscle cars, big trucks and SUVs used to make big dollars for the US auto industry and national economy. Now they’re costing consumers big bucks to keep on the road. Prices at the pump are at record highs and the global demand for oil continues to grow. Currently, the
national average price for a gallon of gasoline is a record $4.023 a gallon, which is more than 10% higher than $3.692 a month ago and nearly 29% higher than the $3.091 average a year ago.
And it’s not just how much it costs to fill up our cars. The airlines are faced with the same problem of higher fuel costs. It’s more expensive to transport goods. Even food prices are forced up, since petroleum-based fertilizers are so much more expensive.
Zecco is very interested in the impact oil has on our economy and wants to educate the community on the basics of the oil industry, outline how demand drives pricing and point out a few things to consider if you want to invest in oil.
Crude Oil Prices 1861 - 2008
[via
Forbes]
Oil 101
Any investor looking to buy oil as a commodity - or invest in companies that refine oil, traffic oil or sell oil - should be interested in the basics of the industry. Of course this means more than “What happens to the price of oil?” There are unique physical characteristics of oil – and any well-informed investor should know about refining oil, oil pricing instruments, physical oil markets, forwards and futures contracts, options and swaps, oil operations and logistics and the impact legal and regulatory control has over the industry.
Of course, we’re not oilmen. But here are some great places you can look to for getting started:
OPEC and the Demand for Oil
Anyone investing in oil should keep one ear open for announcements from the Organization of Petroleum Exporting Countries (OPEC). OPEC consists of 12 countries (Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela). OPEC is responsible for devising ways of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations. While OPEC regulates the available supply for oil, demand is driven largely by growing economies that need oil to power their infrastructure and fill their vehicles. Some interesting articles about these trends are below: