Most of the countries around the world are dependent on import of crude oil to fuel their industries and economic growth. The major economies of the world are recovering from recent recession are on their path of economic recovery. The rising oil price in recent past is going to play a spoil sport for such economies.
Countries such United States, United Kingdom, European Union and Japan all had major plans to get their economies back on track for development but now are faced with a threat to that from rising oil prices. An increase in oil prices will significantly increase the cost of production across the board in these economic powerhouses. According to the IMF estimates world economy grew by 4.8% in the year 2010 but these estimates already have projected a lesser growth rate of 4.3% in the year 2011.
International Energy Agency (IEA) has already issued warnings concerning negative effects of sustained increase in oil prices in year 2011. The oil burden of an economy is going to be adversely effected in the current year as per IEA estimates. At prices of even $90 per barrel the oil burden of various economies of the world is fast approaching the threshold of 2008 recession. To make things worse oil prices have further above $ 100 per barrel barrier and there are no signs to recovery yet. Political situation in Middle East is getting volatile and the unrest is spreading in many countries within the region.
Many countries in the world have already developed strategic oil reserves which can be used to defer impact of this oil increase on their local industry. While developing countries like India which do not have any such reserves can provide very little resistance to this situation and may have no choice but to pass on this increase to the industrial and retail consumers.
Is the current trend is Oil prices is not curtailed soon it is bound to grip international markets and make economic conditions worse. World leaders are monitoring the current situation very closely and may come up with a solution to this. If things are left to take their own course it may turn into an ugly economic situation to tackle.
Will Brent-WTI Spread Dry Away?
Brent is an index for crude oil which represents the average daily prices of trading based on based on 21 days BFOF market in relevant delivery month. Most of the European and Asian market deliveries are based on Brent price index. Whereas on the other hand West Texas Intermediate which is more popularly known as WTI is American benchmark for crude prices. Traditionally there always has been a gap or a spread between the two indices which is characterized by regional economic influence.
Can High Oil Prices Derail Growth of an Economy?
Crude is one of the most important commodities purchased by all the countries around the world without exception. Due to its characteristics and ability to fuel economy and growth of a country it has become the most sort after thing in the modern world. Right from a common man and to most advanced institutions of a country each one has its share of requirement to consume oil. Most of the countries in world have to depend upon imports to meet their requirement of crude.
Get Associated With Crude Oil Business As a Facilitator
There are many entry barriers if you want to get associated with crude oil trading. The first and foremost entry barrier to this business is the amount of funds required to handle even smallest of the crude parcels. In case you have managed funds then comes the second hurdle i.e., getting allocation of crude from a refinery.
