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The Effect Of Economic Uncertainty On The Price Of Oil

Ongoing political uncertainty can take its toll on a number of different elements of society, whether it be the price of the weekly food shop or even the increased cost of fuel. But with a number of political instances also leading to economic disruption, this can make the price of oil and other commodities fluctuate massively, making it extremely difficult to predict. With this being said, in this article, we will be looking into the effects of economic uncertainty and how this can impact oil prices as we move into the new year.

What Affects The Cost Of Oil?

When looking into what affects the price of oil year on year, it is anything but simple. With supply and demand as well as the market sentiment all playing a key role in the price of oil, there are a number of fluctuations that can take place throughout the year. As the demand for oil goes up, the price will then increase and when the demand goes down it should begin to lower. Though this may seem straight-forward the market sentiment then affects this. The price of oil is set on a prearranged price, this, therefore, means that the price of the fuel you are purchasing will then change depending on the amount that they are able to purchase it for.

The Impact Of Turmoil In The Middle East 

When faced with political uncertainty, this can have a significant impact on the economy and thus affect oil prices. An example of this is the turmoil in the Middle East. With a vast amount of political disruption of their own as well as with other parts of the world, this presents a significant amount of risk to the price of fuel as the Middle East is the worlds largest producer of fuel. This presents a significant risk to the supply of oil on a number of fronts as this can impact the transportation as well as the production of fuel in a number of these locations.

In addition to this, the rising tension in relations between Iran and the UK following the seizing of two oil tankers in July of 2019 presents its own issue as they can then withdraw oil supplies to the country. This will then lead to a sharp increase in the price of oil as supplies begin to run low.

The Announcement From The OPEC

In addition to the turmoil in the Middle East there are also a number of meetings being held by the OPEC. With a number of meetings held in September and October as well as some the 177th meeting of the OPEC conference on the 5th of December, there have been a number of interesting developments.

With the price of fuel changing frequently, it is important to note that the OPEC reference basket of crudes has risen to $62.57 compared to the $62.50 the previous day. This is a significant change that is only set to continue in an upward trend as we head into the new year. In addition to this the OPEC highlighted in their 2020 report that the economic growth will remain steady in both 2019 and 2020 at 3.2%. This is key when it comes to maintaining the price of oil as the economic growth will help to stabilise supply and demand and ensure that it is simple in the long term.

The Effects Of The US Energy Policy 

As one of the biggest nations, the US has a large impact on global economic market but with President Trump making a number of changes during his administration, many are seeing that he has much more of an impact than first thought, however, with the deregulation of the US oil industry has allowed for a sudden boom in the production of oil from within the US. This means that the price of fuel within the US is significantly higher than the production of traditional OPEX producers meaning that prices for fuel such as this fluctuate significantly when compared to the fuel that is regulated and produced in the Middle East.

Inflation And Its Relationship With Oil Prices 

Though there is no direct link between the two, the markets tend to match up as oil and inflation are connected as oil is needed to heat homes and run our vehicles. Therefore, due to oil being such a major contributor in a number of markets such as the production of plastics and other materials, this can then lead to inflation rising. However, the decentralized nature of Bitcoin and other cryptocurrencies are not affected by inflation. This is beneficial for those that are investing in alternative finances with the use of social trading platforms such as Etoro as they provide a safe way to invest in financial assets online with open transparency. However, whilst oil prices are affected, it is a digital currency that remains unaffected with many still using CopyTrader technology from Etoro to replicate popular investments with outstanding results. In addition to the implementation of Copytrader technology came the further development of powerful machine- learning engines that helped to provide users with maximum revenue every time., aiding the company in achieving its goal of simplicity when it comes to online trading as a whole.

The Future Of Oil Prices In 2020? 

Though the future of the market remains uncertain, there has been a recent OPEC report that has outlined the early predictions. With worldwide oil prices expected to average about $5.50/b in 2020, this is set to be a cheaper year for the price of oil as well as any important and exports. However, it is important to note that this is only a prediction at this time with industry experts struggling to pinpoint the exact trend that the market will follow. This is in part down to the political uncertainty in the Middle East as well as ongoing political turmoil in the UK and US as this can affect prices as a whole.

With this in mind, accurately predicting the price of fuel as we head into 2020 is becoming increasingly difficult. Whether this is due to the production of oil in the US or the ongoing difficulty in Iran, this can all lead to the market experiencing unpredictable amounts of movement.

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Alexandra Dimitropoulou

Alexandra Dimitropoulou

VP and News Editor
Alexandra Dimitropoulou is a VP and News Editor at CEOWORLD magazine, working to build and strengthen the brand’s popular, consumer-friendly content. In addition to running the company’s website, CEOWORLD magazine, which aims to help CEOs, CFOs, CIOs, and other C-level executives get smarter about how they earn, save and spend their money, she also sits on the Board of Directors of the Global Business Policy Institute. She can be reached on email You can follow her on Twitter at @ceoworld.