Crude Oil Price History And The Effects It’s Had On The World’s Financial Markets

Speculation has dictated the market price of oil future in recent years, creating uncertainty that has impaired international stock prices and financial markets. Most major corporations rely upon crude oil as a prominent input in its supply chain, ranging from an input directly into the production process to a core element of transportation costs to market. With uncertain crude oil prices, nearly every industry has a wide range of cost uncertainties, making future investment decisions difficult and slowing economic growth in virtually every sector. Last summer, with all time highs in crude oil prices Airlines were forced to increase surcharges and close certain passenger routes, while local governments were forced to scale back public transportation. As the sole source of transportation energy, crude oil has created uncertainty for investors, resulting in slow allocation decisions and leading equity prices lower as investors seek to reduce risk exposure.


The recovery of the Dow Jones Industrial Average (DJIA) this calendar year has been related to greater cost certainty on the part of major corporations. As companies reduced overhead, including real estate and human resources costs in the last calendar year, many major companies have also established more stable cost estimates for natural resources. With more certainty around cost estimates, companies are freer to invest in a variety of new projects, including making expansion and growth decisions into new markets. Hedging strategies have further allowed companies to get better estimates on expansion costs, allowing international corporate expansion to continue driving economic growth.

Global financial investors make decisions based on the relative risk of investments to generate returns – with more certainty with respect to financial earnings, equities markets have increased over the past year. Crude oil remains a large cost factor in nearly every industry, and stable crude pricing allows companies to better plan for future expansion and updates to their business plans.

By: Jayesh M. Vasava

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