The price of crude oil touched a peak of $147 per barrel in mid-2008 and sent jitters across the world, resulting in high inflation and higher interest rates. However, from September 2008 the prices have dipped and have hovered around $50-$60 range due to the decline in the global demand and the global credit crisis. This article analyzes the factors responsible for the changes in the crude oil prices. It also predicts the future movement of the oil prices.

The dollar has for a long time remained an attractive investment avenue for the global investors especially during uncertain stock and commodities market conditions primarily because of the economic strength of the US. However, later the US dollar began to depreciate relative to certain other currencies due to various macroeconomic factors. In this scenario, the crude oil futures emerged as an alternate investment option to the global investors. Crude oil attracted the attention of the investors and the speculators and the uncertain geo-political situation in the Gulf further helped to sustain the boom in the oil futures market. The unsustainable crude oil price which peaked to $147 triggered the economic downturn due to the consequent high inflation, high interest rates and low if not negative growth.

However, the current global financial crisis and consequent economic bailout of the financial and other sectors in the US has triggered a huge demand for the US dollar. Hence, foreign institutional investors and big investment funds have been selling their investments in emerging markets and there has been a huge outflow of US dollar from various markets. This has led to a sharp depreciation of several currencies, including the rupee.

Portfolio Organizer Magazine, Crude Oil, Global Credit Crisis, Commodities Market, Emerging Markets, Global Financial Crisis, Foreign Institutional Investors, Global Investors, International Markets, Organization of Petroleum Exporting Countries, OPEC, NASA, International Monetary Fund, IMF.