The accumulated increase of international oil prices in May was close to 30%, hitting the highest monthly increase over last decade. On May 29, the last trading day of May, the benchmark retail price of New York crude oil closed at 66.31 USD per barrel, doubling compared to 32 USD per barrel last December.
The rebound of international oil price was reasonable. However, the current international financial crisis is still spreading and the world economic outlook remains uncertain, thus the rapid rebound of international oil price has drawn people's attention. Factors promoted changes in oil prices can include the following aspects: Firstly the relationship between supply and demand, which is the basis for setting oil prices and can be referred to as "the basis price"; Second is the market "nominal price" driven by financial factors, which can also be referred to as the "price bubble"; Third is the oil price changes caused by unexpected events and geopolitical factors, which can be referred to as "price risk". Viewing from the "basic price", the current global demand for crude oil is slightly lower than the same period last year. Economic recession in major developed countries curbed demand for oil consumption, and oil storage capacity in these countries are plentiful. Looking at the "price risk", there were no major sudden incidents recently. It can be inferred that the main reason for a substantial rise in international oil prices is a financial factor: The market had inferred that the international financial crisis may have hit the bottom, therefore investors and speculators have both preferred to engage in commodity markets including oil and other products; Recently, the exchange rate between USD and euro, pound and yen continued to decline, dollar-denominated oil prices have increased accordingly.
In recent years, the world oil market has undergone profound changes. On the one hand, oil production and consumption gradually showed diversification and a decentralization trend, neither the buyer nor the seller could unilaterally decide prices. On the other hand, the "financial" character of oil market influenced deeply, the international oil price being increasingly under the control of speculative capital.
Although looking at the basic situation, international oil prices are unlikely to continue rising sharply this year, but financial factors make the future trend of oil prices very variable. The world is currently maintaining a tolerant monetary environment and the benchmark interest rate of major currencies nearly equals to zero. As soon as a large amount of capital enters the oil market a new oil price bubble may occur. Badri, Secretary-General of OPEC warned a few days ago, "The speculators are back to the market, not only in the oil market, but also in all bulk commodities markets. We do not want them to influence oil prices."
Britain's "Financial Times" once made an initial estimate: the average oil price last year was 100 USD per barrel. At that time, the world's daily oil consumption was about 88 million barrels, and the total annual cost was equivalent to 3.2 trillion USD. If the average oil price this year reduced to 50 USD per barrel, 1.6 trillion USD can be saved within a year. A rapid rise in oil prices may offset the global effect of stimulating the economy, and even cast a new shadow over the recovery of the world economy.
By People's Daily Online
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