Liberalization of energy markets and pricing mechanism
Difficult to talk about the prices of energy products and that the absence of the price of one them. Investment theory says that energy products are classified under the item of goods, prices of goods determined by several factors the most important fundamental level of quality, Venaft Brent North Sea and West Texas Intermediate oil (light sweet crude), for example, are two different types of oil. Electric energy is a strange kind of goods because they are not normally available and should be handled by human production. In addition to the quality factor, there are two substantive factors are influential and others are the working population and the working of the economy, increase in population and prosperity of the economy lead to higher demand for products and therefore high on commodities.
Survival levels of supply will lead to higher prices, because supply and demand factors which determine the price at the end.
Working population
Developments show that the population growth in the world’s population has reached a “population explosion” and that is what led to the high demand for primary commodities is not absolute, but also relatively well. The increase in prosperity leads to an increase in the per capita consumption of goods, for example, consumes per capita the U.S. today 25 barrels of oil a year, while the consumption of individual Chinese to ten such quantity, as the same applies to the consumption of electric power where coinciding rise in the consumption of electric power with growth in the economy even if a slowdown in the increase of the population census. The workers and the existence of reserves in the ground and the availability of goods, two factors support the supply side, are among the most important factor in determining the price. Provide buffer stock depends very much on the technological level, if we were able to extract the oil from inaccessible locations wells in the deep sea, for example, this will increase the level of official stocks and supply in the market which makes us expect a decline in prices.
Energy production
Another important factor in determining the levels of the display is energy production, when the reach the level of commodity production to 100% of its capacity, then it becomes impossible to increase production levels which will lead to an increase in prices that did not reach the extent of the explosion. But in contrast, will increase in output prices to fall. The global financial crisis led to a sharp rise in OPEC stock to the highest levels. Social unrest can lead to high prices and in extreme cases to explode because it can affect confidence in the possibility of the show. Transport and the level of production capacity are also important factors, the existence of a shortage of qualified personnel carriers, in addition to a surplus in the limited electricity or pipes makes them employees contribute to high prices. For this reason, investing company (Tenet) Dutch to expand and improve the electricity distribution network in the hyphen between the Netherlands and neighboring Germany in order to increase the transfer of electricity. An example of this is that as long as the markets came under the national electricity grids to the limitations of European energy markets will continue to suffer from fragmentation with the existence of significant differences in prices and local characteristics.
Many other factors play an important role in determining the prices of primary commodities. Weather and seasons have a significant impact, as is the case for the replacement and the impact of the currency used in determining the price of the commodity. As is clear, the process of commodity prices is a very complex process due to different trends, which always routes all of the factors leading to impact on prices in different ways. However, it is important to take account of those factors because they have an important impact on the profitability of the business sector and the level of forms and the transition to sustainability.
