World consumers are confronted with possible nightmare of sky-high crude oil prices again
Friday, 5 June 2009
Ming Jinwei
As world crude oil prices have continued to rise in the past few months, consumers, already hit hard by the ongoing global financial crisis, are once again confronted with the possible nightmare of sky-high crude oil prices.
World crude oil prices, which have staged quite a prolonged rally since it hit a multi-year low of around 30 U.S. dollars a barrel earlier this year, are currently testing the 70-dollar threshold.
In May, benchmark crude oil prices on the New York Mechantile Exchange rose some 30 percent, the biggest monthly percentage gain in a decade. Nymex benchmark crude oil prices have more than doubled in the past few months.
The current crude oil market rally reminds consumers of what they had endured last year: surging energy costs as a result of sky-rocketing crude oil prices. Nymex benchmark crude surpassed the historic 100-dollar-a-barrel threshold at the beginning of last year and then it routinely broke records until it reached the record high of 147.27 dollars a barrel in July. High crude oil prices pushed inflation up almost in every country and affected millions of consumers around the world.
Crude oil prices were starting to fall back after the global financial crisis derailed economic growth and the subsequent credit crunch squeezed much speculative money out of the market.
Most analysts believe the latest crude oil market rally largely reflects a boost in investors confidence in world economic growth prospects.
Major advanced economies, including the United States, the Euro zone and Japan, are still in severe recession, but latest economic indicators have shown these economies are possibly starting to bottom out.
Investors have seized any opportunity to buy crude oil futures recently following signs that the world economy might start to recover.
With crude oil prices continuing to rise, some analysts are also singling out some old "culprits" that created market volatility in the past few years: a depreciating dollar leading to wild market speculation.
"A depreciating U.S. dollar has encouraged investors holding assets denominated in other currencies to come back to crude oil markets," Wang Hongmiao, an associate researcher with the Chinese Academy of Social Sciences, said.
Crude oil futures contracts are priced in dollars in international markets. When the dollar is depreciating against other major currencies like the euro or the British pound, investors holding assets denominated in those strong currencies might shift to crude oil futures contracts as they appear cheaper.
Investors, worried about widening U.S. government fiscal deficits and national debts, have pushed the dollar to multi-month lows in recent days. The euro surged as high as 1.4246 dollars in New York on Monday, the highest point in some five months. Meanwhile, the British pound once rose to 1.6497 dollars, the highest level in about seven months.
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Xinhua
As world crude oil prices have continued to rise in the past few months, consumers, already hit hard by the ongoing global financial crisis, are once again confronted with the possible nightmare of sky-high crude oil prices.
World crude oil prices, which have staged quite a prolonged rally since it hit a multi-year low of around 30 U.S. dollars a barrel earlier this year, are currently testing the 70-dollar threshold.
In May, benchmark crude oil prices on the New York Mechantile Exchange rose some 30 percent, the biggest monthly percentage gain in a decade. Nymex benchmark crude oil prices have more than doubled in the past few months.
The current crude oil market rally reminds consumers of what they had endured last year: surging energy costs as a result of sky-rocketing crude oil prices. Nymex benchmark crude surpassed the historic 100-dollar-a-barrel threshold at the beginning of last year and then it routinely broke records until it reached the record high of 147.27 dollars a barrel in July. High crude oil prices pushed inflation up almost in every country and affected millions of consumers around the world.
Crude oil prices were starting to fall back after the global financial crisis derailed economic growth and the subsequent credit crunch squeezed much speculative money out of the market.
Most analysts believe the latest crude oil market rally largely reflects a boost in investors confidence in world economic growth prospects.
Major advanced economies, including the United States, the Euro zone and Japan, are still in severe recession, but latest economic indicators have shown these economies are possibly starting to bottom out.
Investors have seized any opportunity to buy crude oil futures recently following signs that the world economy might start to recover.
With crude oil prices continuing to rise, some analysts are also singling out some old "culprits" that created market volatility in the past few years: a depreciating dollar leading to wild market speculation.
"A depreciating U.S. dollar has encouraged investors holding assets denominated in other currencies to come back to crude oil markets," Wang Hongmiao, an associate researcher with the Chinese Academy of Social Sciences, said.
Crude oil futures contracts are priced in dollars in international markets. When the dollar is depreciating against other major currencies like the euro or the British pound, investors holding assets denominated in those strong currencies might shift to crude oil futures contracts as they appear cheaper.
Investors, worried about widening U.S. government fiscal deficits and national debts, have pushed the dollar to multi-month lows in recent days. The euro surged as high as 1.4246 dollars in New York on Monday, the highest point in some five months. Meanwhile, the British pound once rose to 1.6497 dollars, the highest level in about seven months.
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Xinhua