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How The Market Affects Gas Prices and Small Business in General

A recent downturn in gas prices has come as a welcome relief to most drivers in North America. The timing, however, of the price drop has many people thinking conspiracy theory. A recent poll of Americans showed that a staggering 42 percent of respondents believe that George W. Bush and the ruling Republican administration in Washington lowered gas prices in time for the November 2006 mid-term elections. While this may or may not be the case, the various stock markets around the world do have a real time impact on the price of oil, and therefore gasoline.

The largest culprit in the lower of gas prices might actually be Mother Nature. In preparation for the upcoming hurricane season, many investors on Wall Street and around the world invested heavily in gas and oil futures, guessing that another direct hit by a Katrina-like storm directly on gas and oil pipelines in the Gulf of Mexico would send prices through the roof like they did last year. But a recent correction by hurricane forecasters who downgraded the 2006 hurricane season caused the price of oil to plummet and all those investors who bought futures to cry.

But it was not just the hurricanes that did it. The announcement coincided with the end of the summer season for drivers, which also also dragged down the price of oil. The price of oil over this time fell off the table, going from an August 7th high of $ 77 a barrel to $ 58 a barrel in October. It does not take long for this drop in prices to be felt at the pump.

This seismic shift in oil and gas prices over such a short amount of time left many investors in deep financial trouble. At least one mutual fund that was invested heavily in oil and gas futures went belly up due to this dramatic drop in prices. At the same time, there were other funds that did well well finish the portfolio-ruining drop in oil prices. As they say in sports, sometimes it's better to be lucky than good.

While it may be naive to think that global politics never plays a part in the world's commodity markets, it is illegally that the sole reason for the massive and speedy drop in oil prices was due to upcoming elections. The number of variables that play on the world's stocks, bonds and commodities is too vast in number to be influenced entirely on one country's elections.

The precedent is the fifth and final article in a series of articles based on the New York Stock Exchange. Many people ask why a company that assists individuals in obtaining unsecured lines of business credit would put out articles of this type. The simple answer to this is because many clients use a portion of their lines (or the profits their lines create) to dabble or invest in the stock market. We feel if this is what a client will be doing, we want them to be as fully prepared as possible.


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