How connected are international oil markets Along the same l

How connected are international oil markets? Along the same line of thinking, furhter elaboate upon the relationship fo global financial markets. Describe the inter-relationship of the rise and fall of financial markets in Asia, Europe and the United States

Solution

Oil is the most important and the most politically traded commodity in the international market. The price of the oil is determined by the basic demand and supply pressures and the international politics. Petroleum is sold by the barrel and priced in the US dollars. This is because, all the oil companies from United States and Britain launched the international oil market and control the selling and buying of petroleum products.

From the late 1800\'s untill the formation of OPEC (organisation of petroleum exporting companies), the oil prices were decided and published by the major oil companies. They have controlled almost all the aspects of the oil industry in almost all the fields outside North America, Soviet Union and China. On the formation of OPEC, there is a shift in the trend. OPEC is formed to take control of almost all major oil companies in the international market.

International oil markets are connected in such a way that the effect of one ripple in the international oil market will cause dearly to all the developed and developing nations. Hence these markets are considered very complex.

The world guzzles about 90 million barrels of oil every day. without an inter-connection between the nations, such a huge amount of the oil selling and buying in the international market is highly impossible.

The oil prices in the global international markets fluctuate almost every day. The low oil prices are good for most of the people, most of the manufacturers, and most of the countries. But, they are bad for oil exploration, production and refining companies, and for the oil producing countries.

The global financial markets are at the mercy of the oil price. With the falls and the rebounds in the oil commodity, it is setting a benchmark for the equities and other asset classes. The investors are reportedly nervous about the host of factors ranging from slowing down of the china growth, prospect of eurozone recovery, increase in the US dollar rate etc.

The rise and the fall of the financial markets in Asia, Europe and US purely depends on the market volatillity. the rise or fall of the price of the barrel of oil depends on the International oil companies.