FINAL DOCUMENT - Gilreath 3 I. INTRODUCTION Crude oil is...

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Gilreath 3 I. INTRODUCTION Crude oil is petroleum that is a natural resource which is yielded from the ground. It is usually extracted from oil wells or oil fields which can be very costly and hazardous to the local environment. Petroleum is also very expensive to transport but very valuable to industrious countries across the globe. It takes millions of years for crude oil to form. Crude oil is known to be the remains of ancient plants and animals far before the dawn of man. Crude oil is a controversial issue politically because it is the primary resource for energy consumption and there is debate about depleting reserves. It is also argued that it causes global warming when it isn’t consumed in moderation. However, crude oil is a very abundant commodity thus far. Globally, we have produced approximately 650 billion barrels of oil, but another trillion barrels of proved reserves have yet to be extracted. Petroleum is a highly flammable hydrocarbon which usually has a black or brown color that is used in making fuels such as gasoline and heating oils. Crude oil (CL) is traded daily at the New York Mercantile Exchange (NYMEX) and at the International Petroleum Exchange in London (IPE). It is easily the most significant traded commodity in today’s market. It is the largest traded commodity outside of trading foreign currency exchanges. In 2006, over 71 million contracts were issued which made up over 3.58% of the world market. This is a promising increase in growth. In 2005, nearly 60 million contracts were exchanged on the NYMEX. The United States economy is very dependent on the importation of crude oil. Prices and quantity affect our market as a whole because our society is very dependent on petroleum and the products we use such as gasoline in our automobiles. The U.S. leads the world by
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Gilreath 4 importing over 12 million barrels of crude oil everyday according to a 2006 estimate. The U.S. also has a constant and steady increase in its demand for crude oil imports. This has caused the recent skyrocket of prices in the market when the supply has not met the exponentially increasing demand. The crude oil market is one of the most sensitive and most difficult commodities to interpret when determining the factors that will affect its price. It is a highly controversial topic in the United States because it is the largest consumer or petroleum. Coincidentally, most of the crude oil that we import comes from countries that have an unsteady foreign policy with us. An unlimited amount of factors affect the crude oil market. The largest producer of crude oil comes from the countries that are apart of the Organization of the Petroleum Exporting Countries (OPEC). Iran, Iraq, Nigeria, Venezuela and many others are amongst the participants and we have had a growing tension with these nations in recent decades. OPEC largely determines the amount of supply that is contributed to the petroleum market and if any of these countries are in distress, it is likely for the prices of crude oil to rise. Also, if a refinery or oil well has to be shut down due to a fire this could
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This note was uploaded on 04/20/2008 for the course COMM 212 taught by Professor Lee during the Spring '08 term at University of Delaware.

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FINAL DOCUMENT - Gilreath 3 I. INTRODUCTION Crude oil is...

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