Of when processed into these materials. This

Of all the existing industries in the world, the oil
industry is indeed one of the most influential international business fields to
most countries in the world. Oil is also one of the most widely consumed
energy, it plays an important role in everyday life as well as economic and
social development in various countries. the oil industry is also increasingly
leading to the development of new technologies either directly or indirectly.
And it has been used as a means for economic and political negotiations. Nevertheless,
“crude oil” when refined into various petroleum products that have
different attributes of gasoline, diesel fuel, fuel, kerosene, and fuel oil,
etc. (may, 2017), its value will be
maximized when processed into these materials. This the price of crude oil is determined by the type and
quality of the crude itself. After the result of distilled, light and light
crude oil some refined petrol and diesel products to serve the demand with
different amounts. In addition, sour and sweet crude oil is also priced at
different prices.

Forecasting or forecasting future oil prices is
sophisticated as oil is a commodity of products available globally. Unlike
other products, the quality of the oil product can be made differently to serve
the needs of different consumers. Because the rise or fall of the crude oil
price in the international market depends on the demand from the existing
consumers (Bowler, 2015). The more demand,
the higher the price will be the standard on the international market. Vice
versa, the less demand from its consumers will be the lower the price that will
be used as a standard in the international market. Because oil markets are
mainly regional activities that are born out of cooperation between different
countries and different parties’ needs and environment, several factors then
involve rising or falling prices of crude oil either directly or indirectly.
Even so, the price can be analyzed both at regional and global level

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How
Instability Can Happen?

Oil is a commodity, and as such, it tends to see larger fluctuations
in price than more stable investments such as stocks and bonds. OPEC, or the
Organization of Petroleum Exporting Countries, is the main influencer of
fluctuations in oil prices. OPEC is a consortium made up of 13 countries:
Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar,
Saudi Arabia, the United Arab Emirates and Venezuela. OPEC controls 40% of the
world’s supply of oil. The consortium sets production levels to meet global demand
and can influence the price of oil and gas by
increasing or decreasing production.

This price drop is mainly due to oversupply due to energy
revolutions in North America (America, Canada and Mexico) (Stale, 2016).
In addition, in order to suppress new industry players
and retain market share, the Organization of Petroleum Exporting Countries
(OPEC) maintained its production volume level at the end of November, not
restricting production at all.  OPEC vowed to keep the
price of oil above $100 a barrel for the foreseeable future, but in mid-2014,
the price of oil began to tumble. It fell from a peak of above $100 a barrel to
below $50 a barrel. OPEC was the major cause of cheap oil. It refused to cut
oil production, leading to the tumble in oil prices.

As
with any commodity, stock or bond, the laws of demand and supply cause oil
prices to change. When supply exceeds demand, prices fall and the opposite is
also true. The fall in oil prices can be attributed a lower demand for oil in
Europe and China, coupled with a steady supply of oil from OPEC. The excess
supply of oil caused oil prices to fall sharply. While demand and supply affect
oil prices, it is actually oil futures that set the price of oil. A futures
contract for oil is a binding agreement that gives a buyer the right to buy a
barrel of oil at a set price in the future. As spelled out in the contract, the
buyer and seller of the oil are required to complete the transaction on the
specific date.

Natural
disasters are another factor that can cause oil prices to fluctuate. For
example, when Hurricane Katrina struck the southern United States in 2005,
affecting 19% of the U.S. oil supply, it caused the price of a barrel of oil to
rise by $3. In May 2011, the flooding of the Mississippi River also led to oil
price fluctuation.

 

 

As a result of oil stocks in the global market was
scattered and it automatically reduce the price of black gold.
Another factor is the weakening of oil demand, mainly due
to the slowdown in China’s economic growth rate. Prior to this, oil demand from
China has increased rapidly, but now growth is only one digit.
Globally, oil demand is also down due to the fact that
the United States and other economically mature countries have become very
efficient in terms of fuel (Wilson, 2014).
However, when viewed in general, there are actually 3
main factors causing the fall in oil prices, among them:

1. Excess supply
The United States is doing an energy revolution causing a flood of oil
supplies. In the second half of 2014, OPEC instead of balancing the market,
continues to boost oil production. The Saudi-led cartel is afraid of losing
market share and being defeated by America, Canada and other oil producers.
This is why the price of oil fell drastically. Increasing US oil production is also contributing to the
cause of weak oil prices. Manufacturers there aggressively continue to increase
production. Many analysts say oil prices will not remain stable until there are
oil companies in America that go bankrupt or merge. In addition, Iran’s nuclear deal with Western countries
some time ago is also expected to make oil from the country flooding the
market. There is even a sign that Iran is stockpiling a lot of oil today.

2. Demand decreases
The global economy is in decline. The main causes come from China which is
currently experiencing economic slowdown and make world commodity prices
decline, including crude oil. Meanwhile, economically improving countries, such as the
United States, are implementing efficiency standards to curb oil demand. The
high technology, as well as the attitude of people who are aware of the dangers
of oil use, make global oil demand decline.

 3. Increase in the value of the US dollar
Like other commodity prices, oil is also valued with the US dollar. As a
result, when its value is rising then the price is so for outside America. The
dollar has risen seven percent this year compared to other currencies mainly
due to policies from Donald Trump and the Fed that may raise interest rates
this month.

 

And
also China’s policy that devalues
??the value of the yuan is increasingly putting pressure on oil prices. The
high dollar value makes the demand for oil in the global market declining. For
Indonesia itself, the result of this oil hike will benefit oil producers in
Indonesia such as ELSA, BIPI and MEDC will benefit from the increase. While the
down time, the price of fuel and other low oil products will benefit the people
of Indonesia, especially people with middle income down.

So that the increase or decrease in world oil is like a
double-edged sword. At the moment, the price of West Texas Intermediate (WTI)
crude for April delivery tumbled 5.4% over the past few days, closing at US $
50.28 per barrel on the New York Mercantile Exchange. While Thursday, March 9,
2017 yesterday closed at the level of $ 49.52. The figure is the biggest
correction since February 9, 2016 and the lowest closing level since December
7, 2016. This is certainly a negative sentiment, related to companies engaged
in the oil mining sector such as BIPI, ELSA and MEDC

Conclusion

               The price of oil is determined by many factors (demand, supply anticipation) I think it’s not a good idea to try to fix oil prices. Some countries have tried it, Venezuela, Iran, Nigeria, Brazil (Crowler, 2014). The result was smuggling, corruption, tensions on the state budget and civil unrest after the government sought to pursue international prices. which we can do when it happens is ensuring that the long investment cycle in the oil industry is in line with the demand outlook. Currently the low price we just experienced has reduced the investment of major oil companies dramatically, it seems that more and more oil production will not be in line with demand and that we will again raise prices in the next few years.                 And then larger tax for oil will reduce fluctuations. Consuming oil products at a reasonable level is certainly a great idea because it contributes to the externalities associated with oil consumption (pollution, road maintenance, plastic recycling) it also forces people to use wise resources that will eventually disappear.                 And the last is ensure that people are well informed about oil prices and adjust their behavior and consumption in anticipation of prices.