Opinion: Oil Price Volatility Continues — Because It Can

Manufacturing.net news writer Jonathan Fahey, on September 2, wrote: “The price of oil slunk to a low of $38.24 on Monday, Aug. 24, 2015, the lowest since the depths of the recession in 2009.”; His headline accompanied numerous others as the oil commodity market ran through a recent series of ups and downs. A few days earlier, for example, the per-barrel price ascended by 27% and, within three days, dropped by 8%. Fahey said Oil has moved by at least 6% each of the last four trading days.

He also said the present, general decline was easy to explain, because production was up and the demand far less than expected. He also noted the China stock market decline and devaluation of its currency, which would, because of economic uncertainty, reduce consumption and demand in that region. And, he noted the Japan and Greece economic troubles; and that a lifting of Iran’s sanctions would put more oil on the market.

It is true that oil production is up, so much so in the U.S. that oil producers are petitioning Congress for new policies that would allow them to export crude oil. Presently, U.S. law allows out-of-country sales of petroleum products, but not crude oil. However, if my Kentucky neighborhood is any indication, the fuel consumption must be up, because, it seems, every fifth citizen is now driving an enormous, four-door, urban-commando pickup.

Studies of the China stock market loss prove it isn’t nearly as drastic as first reported, because the investing population is much smaller than, say, economists would find in the U.S. Therefore, the total losses aren’t crisis significant. Additionally, today’s news reported a rise in Chinese stock values.

China’s devaluation of the yuan will affect its citizens by increasing the price of imported oil and fuels, but that specific action will have little effect on oil prices in the U.S. And, Iran has been selling oil all along, mostly to non-friends of the U.S, so although a U.S. sanction release would strengthen Iran’s economy, any new oil sales wouldn’t be significant.

Japan and Greece have struggled economically for several years, which says they are not a meaningful cause to present oil price changes.

Advertisement

Finally, I’ll note that last year, I researched the continual gasoline price changes in the Midwest and found a newspaper report that studied the phenomenon. It, chicken-or-the-egg like, said fuel prices fluctuate heavily in the Midwest because oil prices fluctuate heavily in the Midwest. In my opinion, the real reason for the fuel manufacturer’s raising and lowering in gasoline prices is because they can.

Reference: http://www.manufacturing.net/news/2015/09/oil-prices-volatility-continues