Crude Oil Trading

Understanding crude oil trading can be greatly aided by learning about the various elements that go into setting the price of this valuable natural resource. These elements can include the OPEC Basket Price, the West Texas Intermediate price, and the Brent Blend. The OPEC Basket Price is basically an average of prices in a variety of countries including Mexico, Dubai, Nigeria, Saudi Arabia, Venezuela, Indonesia, and Algeria. The prices in this category are frequently lower. This may be due to the fact that oil from these countries may have a higher sulfur content, resulting in a lower yield when refined. West Texas Intermediate prices can be among the highest since the quality of the product tends to be higher as well. The weight of the product as well as the sulfur content are two factors that can determine quality. Higher quality products will generally turn out a better grade of gasoline. Brent Blend represents crude oil that comes from several fields in the North Sea. While product in this category will not usually be of as high a quality as that of West Texas Intermediate product, it is still a relatively high quality product. Other factors that are used to establish the price of gasoline can include the demand for the product, currency strength, and distribution and processing expenses. All of these factors can have an impact on crude oil trading.

The subject of crude oil trading is an important one since the price of this valuable natural resource can have a major impact on the economy of the United States as well as other countries. Oil is one of the most important commodities that are traded on the New York Mercantile Exchange, or NYMEX. Prices of light sweet crude oil are monitored on a daily basis. Any changes in these prices can have a major impact on the United States economy as well as the economies of other countries across the globe. Commodity traders will look at factors such as political conditions and supply and demand to try to predict what the price of various commodities will be in the future. When prices rise to high, inflation on the cost of other goods and services can be the result. Since most goods will need to be transported from the location where they were created, higher gas prices can mean that consumers will pay more for these goods at a future time. Conversely, lower gas prices can mean that a manufacturer will need to spend less money to ship goods to customers and will realize a larger profit. Hopefully, these increased profits will mean that a manufacturer will be able to offer the product at a lower price to consumers. While supply and demand and other factors can influence crude oil trading, the actions of futures and hedge fund traders have been also blamed for wide fluctuations in price.

Long before the days of crude oil trading, this natural resource played a major role. Petroleum as an important natural resource has been used for centuries for a variety of purposes. Many civilizations used it to fuel fires. Other uses included the creation of tar, which was widely used to pave streets in the Arab world. Distilled petroleum could be turned into important products such as kerosene for lamps. In some cases, the fuel was used as a means of waging war. The need for energy increased with the Industrial Revolution, although coal was the resource of choice at this time. In addition to coal, wood was also a popular fuel for home heating. In the nineteenth century, Russia became a major producer of oil and crude oil trading took on a new dimension. By the time that the twentieth century rolled around, Russia was producing nearly one half of the world's petroleum supply. Drilling for this valuable natural resource began in the United States at around the middle of the nineteenth century in Pennsylvania. With the passage of time, the oil producing giants in the United States began to emerge with wells in Louisiana, Texas, and a variety of other locations. Today, not only are gasoline and home heating fuel supplies dependent upon these industry giants, but a wide variety of modern products are derived from petrochemicals. Most plastics and a large number of cosmetics and paint products require petroleum for production.

The impact of crude oil trading on gas prices is offset in some countries by subsidized gas prices. While such actions can reduce the cost of transporting goods and be generally helpful to the country's economy, there can be drawbacks. Consumers are far less likely to conserve fuel when prices are low. As prices fluctuate, the need for subsidizing gas prices will most likely decrease. The Bible encourages believers to always be mindful that God is the creator of the universe. "Remember now thy Creator in the days of thy youth, while the evil days come not, nor the years draw nigh, when thou shalt say, I have no pleasure in them." (Ecclesiastes 12:1)

No discussion of crude oil trading would be complete without looking at the impact that this industry can have on the environment. Fossil fuel combustion has been known to send pollutants and green house gases into the atmosphere. Water sources have faced pollution as well through spills and refinery by products. While the need for this valuable resource cannot be disputed, methods for reducing negative environmental impacts are important. Alternative sources of energy are also being explored and may hold crucial answers to this dilemma.