Oil And Gas

The entire human population uses oil in various forms for their daily needs but there are a few countries that produce it in sufficient quantities to meet the world demands. Natural gas production is also limited and not many countries have it. Trading in oil has been around since the deregulation of oil prices during the 80’s and the main oil trading exchange is NYMEX (New York Mercantile Exchange). Natural gas and electricity are recent entrants in this market. OPEC (Organization of Petroleum Exporting Countries) used to fix the oil prices on which they would export oil but now the prices are taken from NYMEX. Oil trading has always been governed by the big oil companies like EXXON, Mobil, BP, Shell, etc. they governed the oil and oil product prices and other traders played a very small role in them. Oil has to be pumped stored and shipped either by tankers or pipelines. So production, shipping and storage are major factors that also affect the price of oil.

Whereas oil is universally consumed gas production and consumption is limited mostly to the countries in which it is produced. It is mostly the large oil companies that dabble in oil and its trading but that also not as their main business but as a secondary business. Many small traders have tried to jump in and disrupt the market only for the major companies to step in and regulate the market and bring it back to normal. Most small time traders who have ventured in the energy sector markets have been disenchanted and have left as it is not as lucrative as the stock market and whereas prices are deregulated yet they are in a way controlled by the major oil exporting countries and the major oil companies and they keep a check to ensure that things don’t get out of hand. Prices of petroleum, diesel, jet fuel, kerosene are directly dependent with the prices of crude oil and when the price of crude goes up the prices of its refined products also increases. The prices of the refined products cannot be independent as they are directly dependent on the price of crude oil.

Natural gas and prices of natural gas is a different matter as to transport gas there is a need to develop an extensive network of pipes which will allow the consumers to use it. Oil rigs can be shutdown temporarily to stop production but it is not all that simple where natural gas is concerned. After Saudi Arabia Russia oil was the second largest exporter of oil and the largest exporter of natural gas. Russia has developed the know how and technology to drill deep wells and have gone down as far as over 40,000 feet and tapped into oil reserves that the rest of the world was unaware of. Today Russia is the leading oil exporter of the world and has the lowest production costs.

Oil prices tend to rise and fall depending on the demand and production of oil and recently crude oil was at an all time high when it reached $ 70 per barrel. Shell oil is a major oil company and is well known throughout the world whereas American oil giants like Exxon and Texaco are well known in the USA but not worldwide. Trading in oil and gas is best left to the traders of NYMEX as this is not a business that an online trader can handle or should even try to dabble in. The prices and volumes of trade are far too large and most of the trading is based on futures. This week in petroleum is a fine magazine for those who have an interest in the way the energy market behaves and what technologies are there those developing in the world of energy.