What Determines the Price Movements of Oil?

Oil and oil commodities fascinate the media, and because it draws eyeballs and readers, it continues to be covered similar to a misbehaving celebrity star by the paparazzi.

And just like a paparazzi following the latest antics of a celebrity, we get every little detail of any news, tidbit or event that could make any type of immediate impact on prices.

The result has been the illusion that to buy oil is to risk everything you have on a complete uncertainty. The problem is, that's not even close to being correct, and when taking a long term view of oil, just like anything else in life, it becomes a lot easier to follow and successfully invest in than the outward appearance seems.

So it doesn't matter what's really happening in the oil industry on a day to day basis, because over the long haul it's not the key element that decides where the price of oil is headed.

There's only one thing to consider with oil, as it is with all commodities, and that is supply and demand over a long period of time. Anything else is just gambling and speculating, and you will lose a lot of money if you try to play the oil speculators' game. Don't even bother to try, as it's not the way to make a lot of money investing in oil.

No matter what the media is reporting on today concerning oil, most of it will have absolutely no impact on oil prices over the long term, so can largely be ignored. After all, the media attempts to report today's news, not tomorrows realities. So to make decisions based on the events of a day or even a month or more isn't good investing senses, and again, will lose you a lot of money. All great investors will tell you they're the worst market timers in the world, and they look to overall long-term trends to base their decisions on.

With oil that's no different, and so demand is the key to it all, and secondarily whether that demand can be met. Some of the long term factors affecting demand are emerging middle classes in Asian countries, which will have more money to spend and the desire to buy cars and use gas and oil. That's a trend over the years you can count on remaining.

Another trend will be the discovery of oil, which will play a big part in oil price movements. Other than recent discoveries by Brazil's Petrobras, there haven't been any really major discoveries for a long time, which could imply scarcity.

But, and that's big but, there are a projects hundreds of billions of barrels of oil in shale, located in America and Canada, with the shale in America projected by some to contain far more oil than Saudi Arabia claims to have.

The only question there is how much it'll cost to extract it and if people will be willing to pay the price.

These will be the major factors in oil price movements for years into the future.