OiL Focus I : 石油多面睇 I

Oil, the most common energy source nowadays, plays an extremely important role in the economy of the world! We cannot excape from using it due to its multiple functions. With oil, not only can people drive a car,ship or plane, they can also use it to make plastics,lubricating oil...etc. Without oil,human's activities must be poorly affected. However, oil is not cheap! Its price even raise a lot during these two years.
This week, the writer will deeply explore into the matter of it: Why is the oil so expensive? Will the oil price get sharp increasement continually? How can the oil affect the world's economic and financial market? What are ways to minimize the effect of it?
On 8th July,2006,the Augest crude oil future price is US 74.09, which is quite expensive to the common people,compare with US$28-40 two years before. How come the oil become so expensive? To come to the answer, we should understand the supply and demand of it:
Oil or Crude oil is known as a kind of fossil fuel. It is formed from the dead animals,plants and marine lifes million or billion years ago. When these animals or plants died, they were covered by the mud. With the high pressure, temperature and bacteria actions, they finally become today's oil or natural gas. As this process take a long period of time,oil supply is very limited. Many scientists even think that the oil will run out in the coming 30-40 years.
Even so, people cannot limit their demand on oil. As mentioned above, the crude oil can be seperated for multiple purpose. Other than the car fuel, the plastic cup, the water pipe you used are also made of oil. Its demand also has a trend to increase due the need of manufacturing industries in some developing countries like India and China.
With incresing demand, but limited supply, the oil price would be expensive. However, the oil price is already over US$70, would it raise up contiually when the supply of oil becoming less and less? The writer does not think so! The reason is that the limit supply of oil is being known in the market, the investors have already reflected their information about oil on the financial market. Therefore, without other special news on the oil like oil war, political problem in Iran, Iraq and other Middle-east countries,or greatly increase in demand by China, the oil price would not have a sharp increasement even the oil supply become smaller. Of course, there is an exception case: The institutional investment, because they may not need to reflect any market information!