Commodity price volatility, factors behind their price fluctuations.

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Commodity price volatility, is the key to establishing the relationship between different energy products, their price determinants, the reasons behind price fluctuations.
Crude oil is a large component of production costs for heating oil and gasoline, and therefore fluctuations in the price of crude oil translate to simmilar fluctuations in heating oil and gasoline prices.
The volitility of crude oil, heating oil, and gasoline are found to be highly correlated. On the other hand, crude oil is a close substitute for natural gas as an energy source, and thus crude oil price fluctuations should also affect natural gas price.

Factors behind their price volatility:
WEATHER plays an important role in the demand side of energy markets. Colder than normal temperatures in winter and hotter than normal temperatures in summer can increase natural gas demand and push up prices.
DEMAND for crude oil and heating oil peak in winter.
ECONOMIC GROWTH results in increased demand for goods and services from the
commercial and industrial sectors, generating an increase in demand for both crude oil and natural gas.
SUPPLY, OPEC decisions about production and prices, political events, storage levels, and natural events are among the determinants of energy prices.
MACROECONOMIC factors affecting energy prices inclued bilateral exchange rates, price indices, monetary aggregates, convenience yield, Treasury bill yields, equity dividend yields, and junk bond premiums.


Published by Andreas Koudellou

A senior associate focusing on early stage-companies. As a foodie I am a recognized expert on where to find the best dry-aged beef in NYC. I have a deep finance and international relations background, getting my start at the Council on Foreign Relations, UN and then on to HNW/UHNW capital management.

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