More than any other category, oil and energy commodities have the biggest influence on our daily lives. The prices of various sources of energy, in turn, affect the cost of everything we consume, including the groceries we consume, our clothes, electronic devices and the fuel we put in our vehicles. They also impact the cost of regulating the temperature in our homes and public structures. A world without oil and energy commodities would have none of the basic things we need for survival.
Oil and energy commodities include crude oil, gasoline, coal, electricity, natural gas and ethanol. Except for ethanol and some electricity, the majority of the oil and energy commodities trading deals with non-renewable energy resources. Oil and energy commodities prices depend on factors like the demand, supply, weather factors, government regulation and global markets.
Of the various forms of energy available to us today, crude oil and natural gas combined together easily constitute more than fifty per cent of the consumed total primary energy since 2014. Due to factors like high energy density, ease of transportability and abundance of availability, crude oil has become the prime source of energy since the 1950s. In historical texts, oil was mentioned 4,000 years ago, with there being the presence of oil pits near Babylon. But, the first commercial use of oil did not begin until the 1850s. The demand for petroleum as a source of fuel rose quickly, and the first commercial well was constructed in 1854 in Poland by Lukasiewicz. Lukasiewicz also invented the kerosene lamp and ushered in the first street lamps in Europe.
Natural gas, which is a combustible concoction of hydrocarbon gases, is widely known for being a safe and clean source of energy. The potential of the natural gas seeping through the earth’s strata was realized as early as 500 BC by the Chinese. They used it to boil seawater to remove the last from it and make it suitable for consumption. Britain was the first country to use natural gas in 1785 commercially. They used natural gas produced from coal to light the houses and streets.
Factors Affecting Prices
Like most commodities, the market for oil and energy commodities trading is complex and ever-changing. In reality, the prices of most energy sources fluctuate on an hourly basis. The primary economic factors, like supply and demand rates, are comparatively predictable. However, political and other regulatory factors often complicate the equation. Like most items of trade, financial speculation can affect energy prices to quite an extent and is the most difficult to predict. When a market follows a direction different from that indicated by the supply and demand, the most likely factor is financial speculation.
Developing nations of Asia, Africa and the Middle East have an increasing demand for factories to supply them with metals, machinery and other manufactured goods. According to research, the energy demand in India will become three-fold by 2040. The growing population of the world will also create an increased demand for oil and energy commodities. This will create pressure for Oil and energy commodities trading primarily in India and China, as people move from the rural areas to the cities.
Attempting to strike the exact bottom of the market is a fool’s errand unless you are a professional trader in commodities. However, it is possible to make an informed decision regarding the general direction of the oil and energy commodities prices over the next couple of years.