2. Refineries are running at nearly 100% capacity.
As demand for oil products has increased, refineries worldwide are running at nearly full capacity to try and meet the demand. Due to the huge capex requirement to set up and run refineries, it has not been possible for more refineries to come online soon enough to sufficiently cover the demand for end products.
Additionally, legislative changes in fuel specifications in many countries, has meant that total refinery capacity has reduced as they adjust systems to deliver better quality fuels. The adjustment and upgrading of refineries to deliver better fuel quality has required significant refinery investment across the region. 3. Weather Events
Hurricane Katrina and Hurricane Rita have temporarily reduced the refining capacity of the US. Such reductions and speculation about availability of finished oil products (e.g. petrol) can cause volatility in fuel prices which can reach across the globe.
4. Seasonality Effect
Global product prices are also impacted by seasonality factors such as the onset of winter whereby Europe, Japan and the US will see an increase in the demand for diesel and kerosene to heat homes and offices. Likewise, summer will see an increase in demand for petrol as people tend to travel more during those months. Studies have shown that a significant level of the price changes in petrol and diesel prices are attributed to seasonality effects.
5. Currency Fluctuations
Product prices are traded in US$ per barrel and as such, Singaporean consumers will be impacted should the US dollar move up or down, as this impacts on our purchasing power.
6. Market Speculation
In recent years there has been new entrants and increased interest in the oil commodities market, mainly from investment funds and hedge fund managers. It is widely believed that this has added to the volatility of the oil prices.
7. Political Instability
Political instability in the Middle East continues to cause uncertainties around crude oil availability and has a significant impact on crude oil price volatility.
Disclaimer: All information provided herein is intended for general information purposes only and does not constitute an advice or directive. You should not rely on it in connection with the making of any decision. While we try to ensure that all information provided herein is correct at the time of inclusion, we do not guarantee the accuracy of such information, in particular, information that is obtained from a third party source. We are not liable for any action you may take as a result of relying on such information or for any loss or damage suffered by you as a result of you taking this action.
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