Factors that contribute to the rise in oil pricesOil: It's the most traded commodity in the world, and one of the priciest. We need it to run everything from our cars to our factories to our airplanes, and it's getting more expensive.

Most analysts point to five major factors that have contributed to the rise in the price of crude oil, including currency exchange considerations, oil inventories, industrial performance as a measure of returning demand, supply constrictions and mergers and acquisitions. Dr. Kent Moors, Ph.D., writes about these factors in an article in Money Morning.

Although nearly all worldwide sales of crude oil are calculated in dollar value, the local sale of the products refined from that oil is measured in hundreds of different types of currency. Oil's dollar value is most significantly impacted by the Euro - a currency that has been gaining in value for years. When the Euro's value increases relative to the dollar, the price of crude oil rises.

Oil inventories, or the amount of stored oil, is another indicator of price. When stockpiles are high, demand sinks and prices fall. When stockpiles are low, however, demand increases, as do prices and fears over oil shortages. Recently, stockpiles have been declining - which could point to a sharp increase in costs.

Industrial demand is another good gauge of oil prices. Many economic indicators - such as construction, manufacturing and trade - are energy-dependent, which means they rely on oil to operate. As these indicators improve, the demand for oil will rise, along with its price.

"A recovery cannot take place without increasing uses of energy," Moors writes. "And that translates into higher pressure on oil prices."

Supply chain concerns - how much oil is available, and where is it coming from - can also contribute to the price of crude oil. When more oil is available, prices fall. When weather, embargoes, natural disasters, pipeline explosions, cross-border problems or any other number of issues arise, oil can become difficult to obtain and subsequently more expensive.

Finally, as many smaller oil companies are absorbed through mergers and acquisitions by much larger conglomerates, competition decreases. With fewer companies in the market, the remaining enterprises can charge much higher prices for crude oil.

However, there is a sixth, hidden catalyst that Moors has identified, a factor he has named the "ratcheting effect."

"Just like the ratchet in your garage moves in one direction to allow greater leverage the other way, so, too, will the 'ratcheting effect' increasingly bring about the same movements in oil pricing," he writes. "The underlying volatility - the ratcheting effect - will increase prices more than the actual market factors would seem to justify."

Moors suggests that investors get in on oil stocks before prices skyrocket, as he believes they will based on these six factors. For companies, surging oil prices could mean trouble, but it also means that now may be a good time to begin investing in alternative fuel sources or stockpiling extra fuel before prices climb even higher.

Meanwhile, in the short-term, oil prices have continued to rise and are now encroaching on an eight-week high, according to Bloomberg.

"The last few days there's been no stopping this market," Alexander Ridgers, head of commodities at London-based CMC Markets, which handles more than $150 million a day in U.S. crude contracts, told the paper. "We're seeing retail investors being drawn back into oil." 
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