LightSweetOil.com

The recent world wide economic downturn has caused a decline in all commodity prices. Copper, aluminum, coal, wheat, rice and almost every other commodity has experienced a sharp decline in price. The price of light sweet crude oil was no exception. From a high of $145.08 per barrel in 2008, it plunged to a low of $33.98 per barrel in 2009. The price of light sweet crude oil has recovered some value as it now trades around $78.00 per barrel.

The price of light sweet crude oil is controlled by several factors. For example, the recent plunge in price was not caused by a increased supply or improved technology but rather the combination of decreased demand, drawing down of inventory and no small amount of fear for the future. All three of these factors have somewhat diminished.

Demand for light sweet crude has increased because it is the preferred source of oil to produce gasoline, kerosene and diesel fuel. As personal incomes and industrial activity recover, the demand for automotive fuel and heating fuel can only increase. In the previous months, refiners allowed their stockpiles of fuels to reach extremely low levels. They are now forced to replenish their inventory and meet increased demand at the same time. The refiners have once again begun to buy light sweet crude oil in the significant quantities of the past.

The future contains a mixture of forces that tend to force the price of light sweet crude oil both up and down. The emerging economies of nations like China and India will require an ever increasing supply of light sweet crude oil for the production of fuels. As the economies of the industrialized nations like the United States and Britain recover from the recession, their demand will return to previous or even higher levels. The alternative to light sweet crude oil is the the heavier oil generally produced in the Middle East. This heavier oil has been cheaper to produce in the past but more difficult to refine than light sweet crude. The instability of this region and the increasing production costs make this heavier oil less attractive to refiners.

There are factors which could tend to drive down the price of light sweet crude oil. If the current economic recovery should falter or fail, the demand for oil will fall. Improved gasoline mileage is being mandated by many governments and demanded by most consumers. The environmental movement is opposed to continued reliance on fossil fuels and has many initiatives in place to decrease the use of fuels derived from light sweet crude and all other oils.

There is, of course, some disagreement over the future price of light sweet crude oil. To make sense of these contradictory forces driving the price of light sweet crude oil, the most important item for the investor is to determine the time frame in which the individual factor will have the most impact. The environmental and technological factors may eventually have a great impact. However, it is very unlikely that their impact will be seen in the near future. The current economic recovery indicates an increase in the price of light sweet crude oil for the short term. 2010 should see a continued increase in the price of light sweet crude oil with only temporary downward moves.