Oil price forecasting for 2012: key market analysis factors

2012 Oil Price Forecast

Global demand has created a shift in the economic demand and supply curve for oil prices. Since the new millennia, the demand for oil has increased exponentially as the developing world industrializes and hence requires more oil-based products and fuel necessary to facilitate growth in these markets. Although measures to mitigate the expense of future oil prices and to lessen the expected demand for the product, prices continue to push higher as oil now commands a premium price for heating uses as well. Spikes in oil prices have become more common as taxes and other factors now contribute to the price of oil that is outside the influence of supply and demand cycles.

A return to $90 dollar oil prices is a level that hasn't been seen worldwide since the fourth quarter of 2008. "The $90 level was last seen in early October 2008 when crude oil prices were plunging along with the economy (Mufson 2010) At that time, an overheated, bubble economy had pushed oil beyond $110 a barrel and a retraction thus had oil returning to pre-bubble levels. However, speculation in oil at $90 per barrel remained high and confirmed a future where oil prices would dictate the policy of government and industry going forward.

Since 2008, oil prices have remained relatively low as prices remained below $90 per barrel. Supply disruptions have been out of the news in the recent past resulting in relatively stable oil prices. Over this period of time research and development into alternative fuel sources has risen dramatically to give rise to products that cut the use of oil. These technologies seek to reduce the demand for oil as a function of automobile use and HVAC driven machinery. Additionally, this reduction will reduce demand on global oil supplies and will result in an increase in oil prices however the rise is not subject to the level of increase should alternative fuel resources had been invested into.