Understanding Oil Prices: A Guide to What Drives the Price of Oil in Today's Markets

By Salvatore Carollo

It's a fair bet that most of what you think you know aboutoil prices is wrong. Despite the massive price fluctuations of thepast decade, the received wisdom on the subject has remainedfundamentally unchanged since the 1970s. When asked, most people- including politicians, financial analysts and pundits- will respond with a tired litany of reasons ranging fromincreased Chinese and Indian competition for diminishing resourcesand tensions in the Middle East, to manipulation by OPEC andexorbitant petrol taxes in the EU. Yet the facts belie theseexplanations. For instance, what really happened in late 2008 when, in just a few weeks, oil prices plummeted from $144 dollars to $37dollars a barrel? Did Chinese and Indian demand suddenly dry up?Did Middle East conflicts magically resolve themselves? Did OPECflood the market with crude? In each case the answer is adefinitive no - quite the opposite in fact.

Industry expert Salvatore Carollo explains that the truth behindtoday's increasingly volatile oil market is that over thepast two decades oil prices have come untethered from all classicalnotions of supply and demand and have transcended anycountry's, consortium's, cartel's, or corporateentity's powers to control them. At play is a subtler, morecomplex game than most analysts realise (or are unwilling to admitto), a very dangerous game involving runaway financial speculation, self-defeating government policymaking and a concerteddisinvestment in refinery capacity among the oil majors.

In Understanding Oil Prices Carollo identifies the keyplayers in this dangerous game, exploring their competing interestsand motivations, their moves and countermoves. Beginning withthe1976 oil embargo and moving through the 1986 Chernobyl incident, the implementation of the US Clean Air Act Amendments of 1990, andthe precipitous expansion of the oil futures market since the turnof the century, he traces the vast structural changes which haveoccurred within the oil industry over the past four decades, identifying their economic, social and geopolitical drivers, andanalysing their fallout in the global economy. He explores the oilindustry's decision to scale down refining capacity in theface of increasing demand and the effects of global shortages ofpetrol, diesel, jet fuel, fuel oil, chemical feedstocks, lubricantsand other essential finished products, and describes how, beginningin the year 2000, the oil futures market detached itself almostcompletely from the crude market, leading to the assetization ofoil, and the crippling impact reckless speculation in oil futureshas had on the global economy. Finally he proposes new, moresophisticated models that economists and financial analysts can useto make sense of today's oil market, while offering industryleaders and government policymakers prescriptions for stabilisingthe market to ensure a relatively steady flow of affordableoil.

A concise, authoritative guide to understanding the complex, oftmisunderstood oil markets, Understanding Oil Prices is animportant resource for energy market participants, commoditytraders and investors, as well as business journalists andgovernment policymakers alike.

• Format: Hardcover
• Language: English
• ISBN: 1119962722
• ISBN13: 9781119962724
• Release Date: December 2011
• Publisher: Wiley
• Length: 208 Pages
• Weight: 0.95 lbs.
• Dimensions: 0.9" x 6.3" x 9.0"