Why do crude oil prices rise

In fact, since the beginning of the year, oil is up Natural gas prices have risen even more strongly—more than tripled in Europe and almost tripled in the UK. This has widespread implications for global growth, inflation and the real economy. We are clearly seeing an upswing in demand due to reopening of economies, i. More importantly, this is coinciding with supply side shortages. Last year, when we had lockdowns, natural gas, coal and oil storages could not get replenished to the usual extent, due to movement restrictions.

As such, during winter, storages were drawn down as these natural resources were used to heat homes. At the same time, while truck drivers were considered essential employees and allowed to work, the training schools for these truck drivers were shut down. As a result, today we have an acute shortage of trained truck drivers who can transport these natural resources in large container trucks, which in turn, is leading to storages not getting replenished as quickly this year too.

Going into the winter season, storages across Europe, particularly the UK, and parts of Asia are running at below average levels. Crude prices have risen sharply in on the back of a recovery in global demand as the world economy recovers from the pandemic.

So far, these oil-producing economies have signalled only slow production increases, which is leading to a rise in gas prices as well. A shortage of gas in Europe and Asia has boosted demand for oil for power generation. The rise in crude prices has contributed to petrol and diesel prices hitting all-time highs in India. Prices of petrol and diesel in India are pegged to a day rolling average of the international prices of these fuels. High taxes by the central and state governments too have contributed to retail prices being far higher.

While a sharp surge in oil prices can create short-term panic in the equity markets, historical precedents show that equity markets often bottom out alongside a bottoming out of oil prices. When oil futures turned negative last year at the peak of the pandemic, stock markets bottomed out, but since then they have been on a rising spree in line with surging oil prices. Analysts point out that increasing oil prices reflect growing demand in the economy, and equities often deliver more than the expected inflation that the oil surge may lead to.

From October 1 through October 29, , weekly data indicate that U. Add us to your site. Today in Energy. November 9, Crude oil demand returns faster than supply, increasing prices and reducing inventories Source: U.

The U. N said in its closely followed report on Friday. The International Energy Agency on Thursday said the energy crunch is expected to boost oil demand by , barrels per day bpd.