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For decades oil prices were stable, then in the mid 1970s the industry exploded. Technological advances and the political landscape contributed to the uncertainty, lack of stability, shortages and rising prices. Nearly 30 years later, prices have skyrocket to more than $70 per barrel and the forecasters predict that in mid to late 2007 when it is expected to experience a slight decline for the next two years.
However, there are no certainties when it comes to oil prices, but there are a few large scale factors that can minimize the risk by offering a reasonably accurate projection.
As demands continue to rise, other countries like India and China are also experiencing technological and cultural changes. The trend seems to be in an upswing with no indication of slowing, reversing or of being reversible.
India is riding in on the coattails of its western neighbors in regards to technology and business methods and is emerging in the 21st century. This brings with it an increased demand for energy, mainly oil based, so that homes, office buildings and manufacturing plants can be erected. Rural economy is getting a facelift in many areas as this movement brings with it such exponential growth which, in turn, increases the demand.
Demand is not the only piece of the puzzle, though. As India's purchasing power to obtain those goods increases, other growth is showing up as well. India has a wealth of inexpensive, highly educated work force which is being sought out for outsourcing of Information Technology, electronics manufacturing, communications and more. This is continued to grow and expand for at least another decade. One indication of this growth is the rapid growth of broadband throughout India.
China is a technological mega country with the largest mobile phone use in the world and a close second for the largest internet population. Energy is in demand throughout the world, but in China it is expected to rise steadily for at least the next decade.
Although China is perceived to be a Communist nation, social forces are causing it effectiveness to decline. As of yet, it is impossible to predict whether the repression will increase or decrease, but it is inevitable that the flow of information will not be stopped and it will reach the people one way or another, despite any government's attempts to block it.
The social changes within China seem to be somewhat proportionate to the increase in business there. Demand for energy is on the rise and new infrastructure, buildings and manufacturing plants are cropping up on a consistent basis. These businesses and growth all require energy, mainly oil based energy.
Demand continues to rise yet simultaneously supply rates are dropping off or have stalled. Temporary losses, such as with refineries, that occur as the result of disasters may be recovered in a matter of months, up to a year. However, North Sea oil production, which saw its peak in 2000, has seen a gradual decline. Until the time that political changes come around, releasing the massive reserves that are known to be in Alaska, it is not expected that there will be new discoveries of sources that will be utilized. Not many new sources are expected to be realized throughout the globe.
As technology leans in the direction of developing new forms of energy, there is no expectation that any of these sources will appear on the market for a period in excess of ten years. Fuel cell powered cars, which only account for 7% of gasoline use, are not expected to make an appearance for quite a few years.
Existing political pressures in the United States are hindering any hope of a change in the current situation. Waste disposal is one of the primary problems on the political forefront that shows no promise of a solution anytime soon. However, there are new forms of oil trading mechanisms that are evolving that allow the average investor to partake in a market that was at one time exclusive.
For example, e-mini futures on the CME allow for trading contracts that are half the traditional size of 500 barrels. Futures and options on the NYMEX remain at the 1,000 barrel size, yet they require less that 5% investment. These moves place these trades within the grasp of all types of investors. Commodities pools and funds such as those that are offered by Pimco and Oppenheimer allow investing lower amounts which are increasing their popularity.
This time in the marketplace can offer even the average investor a favorable risk and reward balance in oil commodity trading.
Category: InvestingTrading Oil in Commodity - Futures Trading was written by:Author:John TangAdded: Wed, 03 Oct 2007 22:09:50 -0400 This Article Has Been Read 41 times View all John Tang's articlesAbout the Author: Optimum7.com is an Internet Marketing Consulting Company with primary focus on Small and Mid-Sized Enterprises (SME’s). Optimum7.com offers a rich consultative approach that our clients find refreshing. We actually listen to our clients to learn exactly what their problems and objectives are. Through a proven process, we collaborate with our clients to truly understand where they are and where they want to be next month, next year, and in 5 years. Nintendo’s Marketing & Innovation Comeback. |
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