Sunday, May 8, 2011

Lesson # 11 : Crude and the Market


There is an inverse relationship similar to gold between the market and crude. Crude in general refers to the price of oil in general. Oil as we all know is a rare commodity and due to it’s limited availability and restricted geographical locations the price of crude undergoes a change on daily basis.

The location of crude is mainly restricted to the Middle East and the amount of supply is directly controlled by a few powerful nations in the Middle East.

When the price of crude rises it affects almost all the industries in general.

For instance, Industries using petroleum as a source of energy to run their machines now have lesser production as the amount of petrol they can purchase decreases. Similarly, a consumer who owns a car has to spend in excess on petroleum if the price rises as a result the amount of his salary he is bound to spend on other goods decreases. Thereby, affecting the profits of those companies. This also results in lower investing in the Market. As the number of people purchasing shares are less the chances of the market going up are almost negligent.

When the crude was at it’s peak at around 150 $ a barrel the market was at it’s rock bottom.
The only stocks that go up when crude is up are those that deal in alternative sources of energy. For instance, stocks such as Jaiprakash Hydo { Hydro electricity} and Suzlon { Alternate sources of energy} were amongst the bullish stocks on the market.

Loads of Wealth
Udit Sabharwal { on behalf of Doodle inc}