Oil Prices Fall Based On Consumer Confidence: March 2010

Consumer confidence is something that really has a large impact on the stock market movement. When there is a lack of consumer confidence, it can be very hard for the stock market to recover because with consumer confidence comes investor confidence. Case in point is the drop in oil prices which are being caused by a lack of consumer confidence. For the market to do well, consumer confidence must increase, and then the investors will begin to invest in the market.

Americans are Concerned About Spending Money now

This past week, oil prices fell, including a one dollar decrease on Friday alone that pushed the price of a barrel of crude down to only $81. The reason for this decrease is based on investors being concerned about the energy demand of the United States, as well as a lower than expected U.S. consumer confidence number. Consumer confidence fell in the early part of March based primarily on the poor labor market that is making Americans more concerned over spending money, including spending money on gasoline. Due to the revision in January retail sales, the crude oil market was pulled down.

What makes it worse for investors is that oil prices actually went up to $83 this week before falling drastically to $81. While two dollars may not seem like much of a fall, it can mean a difference of millions of dollars for companies that are shipping millions of barrels of oil every single day.

Crude for delivery in the United States in April has already fallen by nearly a dollar as well, and Brent crude for delivery in oil has fallen by even more in London, showing that oil prices are dropping across the world based on consumer confidence.

Developing Countries are Starting to Consume More Oil

Oil companies can at least look at the good news from the International Energy Agency, which issued a report that stated oil demand in 2010 is expected to be higher than previous estimates stated. The reason for this increase is the growth of the demand for oil in developing countries. The oil demand for the world in 2010 is expected to be about 86.57 million barrels per day. This means that a fall of one dollar on one day of investing can result in $86.57 million less being made by companies, which is not good for the economy.

As the summer season approaches, it is expected that oil prices will increase as demand for gas increases when families around the world begin going on summer vacations, especially in the United States which is the world’s largest consumer of oil.

Oil prices have a big effect on our economy. The lower the prices are the better it is for the consumer because they can save more money for spending elsewhere. However, when consumers are worried about the economy, they can cut back on spending and that hurts oil prices. It is a double-edged sword, when oil prices fall; it can make investors nervous but save consumers money. When oil prices go up, it can make investors happy but cost consumers more.

What is certain is that oil consumption should rise in the coming months, eliminating any losses experienced in the price of crude over the first part of the year.

Further Reading

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Billions of Dollars Have been wasted in Crysler

Why do Oil Prices Fluctuate

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