The Rollercoaster Ride of Oil and Gas Prices

Because people have to put gas in their vehicles every day, they are probably more acquainted with the underlying cost of gas than they ever thought they would. In some areas, gas prices stay relatively static, while in other places gas prices can change erratically. This makes it difficult for the average American to budget for gas. In addition, because of rampant speculation and sometimes greed, gas prices can spike unexpectedly.

There are a number of reasons that gas fluctuates in price. The first reason is that oil production in the United States is higher than it has ever been. This leads to higher reserves of unrefined sweet crude oil that is produced in the United States. In addition, the US is now exporting crude oil. This has led to a larger surplus of oil globally.

Perhaps one of the main contributors to the changes in the price of oil and gas is the cost of crude oil. Lower prices for crude oil equals lower oil and gas prices. Conversely, higher prices for crude oil means more expensive oil and gas. Experts agree, and statistics support their opinions, that crude oil and gasoline products are still in high demand. However, prices are kept low thanks to contract trades.

A contract trade allows a buyer to predict the value of a commodity rather than actually trading the commodity itself. Since contract trades don’t actually trade oil, they pinpoint an even lower price for oil. Because the value of oil is already trending downward, these contract trades lower the price of oil in order for the trades to be profitable. This is true even though market demand should result in higher prices. In essence, the value of oil is suppressed for prediction trades to be profitable.

With this current set up in place, there is no end to the highs and lows that oil and gas prices experience. Unfortunately, these factors can change, and oil and gas prices can shoot up exponentially virtually in no time at all, further exacerbating the price of oil and gas. If you want more information on some of the finer points of these issues and what you can do to prepare for them, you can discover info here.


Categories: Financial