Energy: Driving the Economy

Of the numerous forms of energy, crude oil and natural gas combined comfortably constitute more than half of the total primary energy consumed in 2014. Due to its high energy density, easy transportability and relative abundance, crude oil has become the world's most important source of energy since the mid-1950s. Interestingly, oil finds a mention more than 4000 years ago; according to Herodotus and Diodorus Siculus there were oil pits near Babylon. However, oil was first used commercially in the 1850s when Ignacy Łukasiewicz discovered the process to distill kerosene from seep oil (petroleum seeps) that provided a cheaper alternative to whale oil. The demand for the petroleum as a fuel then quickly grew; leading to the world's first commercial oil well in Poland in 1854, constructed by Łukasiewicz. Interestingly, Lukasiewicz is also credited with the invention of the kerosene lamp (1853) and the introduction of the first street lamps in Europe (1853).

Natural gas, a combustible mixture of hydrocarbon gases is largely known for its clean and safe source of energy. As early as about 500 BC, the Chinese discovered the potential of natural gas seeping through the earth’s surface. They used it to boil sea water, separating the salt and making it drinkable. Around 1785, Britain became the first country to commercialize the use of natural gas; natural gas produced from coal was used to light houses as well as streetlights.

"Energy is Eternal Delight" - William Blake

Crude oil

OPEC controls almost 40 per cent of the world's crude oil, accounts for about 75 per cent of the world's proven oil reserves, and exports 55 per cent of the oil traded internationally.

  • Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits in natural underground pools or reservoirs and remains liquid at atmospheric pressure and temperature. Although it is often called "black gold," crude oil has a wide ranging viscosity and can vary in colour to various shades of black and yellow depending on its hydrocarbon composition. Crude oil can be refined to produce usable products such as gasoline, diesel and various forms of petrochemicals.

    Even though most crude oil is produced by a relatively small number of companies, and often located in remote locations far from the point of consumption, trading in crude oil on a global basis has always been robust. Nearly 80% of international crude oil is transported through waterways in large tankers and most of the rest by inland pipelines.

    The majority of oil reserves in the world is in the Middle East, at 48 per cent of the known and identified reserves. This is followed by North America, Africa, Central and South America, Eurasia, Asia and Oceania, and Europe.

  • Crude oil is the most important commodity. Because of its irreplaceable strategic position and its impact on overall inflation, the trend of crude oil prices influences the trend of overall commodity prices. In addition, crude oil is almost entirely industrial demand, which affects it. The price trend has a single factor, and that is the change in the relationship between supply and demand. Therefore, its market is simple, the trend is easy to grasp, and at the same time, the large fluctuations in the increase mean that the investment income and opportunities of crude oil are greater!

Natural Gas

Natural gas is a vital component of the world's energy supply. It is one of the cleanest, safest, and the most useful of all energy sources. Given its growing resource base and relatively low carbon emissions compared with other fossil fuels, natural gas is likely to play a greater role in the world energy mix.

  • As early as about 500 BC, the Chinese discovered the potential of natural gas seeping through the earth’s surface. They used it to boil sea water, separating the salt and making it drinkable. Around 1785, Britain became the first country to commercialize the use of natural gas; natural gas produced from coal was used to light houses as well as streetlights.

    Without any effective transportation method, natural gas discovered before World War II was usually just allowed to vent into the atmosphere, or burnt, when found alongside coal and oil, or simply left in the ground when found alone. Once the transportation of natural gas was possible, new uses were discovered. These included heating homes and operating appliances, such as water heaters, ovens, and cooktops. Industry began to use natural gas in manufacturing and processing plants, in boilers used to generating electricity.

  • Since the spot natural gas market is internationally aligned, it is open and transparent and will not be perceived as manipulative.

    Spot natural gas can be bought long for profit when it rises and short for profit when it falls, thus allowing for diversification of trading.

    Natural gas can be traded multiple times per day to increase profit opportunities and reduce investment risk, but spot natural gas is traded on a "T+0" basis, allowing investors to sell immediately if they find they have made a mistake, thus avoiding the risk of investing in the stock market.