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.
Crude price are controlled by international demand and supply mechanism and is bound to fluctuate. While preparing budgets for a country often normal variance of oil fluctuation is considered and if prices are held between this variance it does not affect the planned growth prospects of the economy.
In fact there can be events happening around the world which can bear direct influence on the crude prices and they can go for an unprecedented rise or fall. Current political crises in Middle East had lead to a sudden increase is oil prices. Not only prices are high and expected to go even higher there are growing concerns on even receiving safe deliveries of the commodity as it has to be shipped through this troubled region. In case there is sudden unexpected price rise government has no option but to increase the retail oil prices in their respective countries. As a result in higher prices cost of most of the products is increased in that country because these products are transported by automobiles which run on fuel oils. Oil is also required to run some of the major industries and to transport their raw materials hence there is also an increase in cost of production in general across the nation. This again leads to increment in sale price of finished products.
Consumer remains at the receiving end of this price rise spiral. Soon there is unprecedented increase in inflation levels of an economy adversely effecting disposal income and saving levels of individuals and nation as a whole. If oil prices stay on these high levels for long it is bound to hamper the growth of an oil importing economy. Government of these countries may try to divert funds from other resources to cover up for this price raise leaving other important sector to suffer more because of lack of fund allocations. Weaker economies are bound to get effected by this is short time periods while other stronger economies can defer this adversity for little longer time periods. All in all, prolonged high oil prise is bound to derail growth process of any oil importing economy.
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.
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.
Why Many Facilitators Fail With a Crude Oil Business
Facilitators are present in most of the trading businesses and also have proven their worth for centuries. Facilitators perform certain important functions in a trade cycle so that it functions smoothly. Often they are aware of the best deals in the market and can help someone new in the business to survive and consolidate. However facilitator requirements for crude oil trading business are more advanced and unique.
