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Green Energy Focus Might Push Up Oil Prices

Tue Jul 20 2021 12:50
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Everyone out there concerned with the globe's environmental problems knows that green energy is the future of the world. But what will happen to fossil fuels? Most beginners in the market think that oil prices will fall. But the expectation of oil is totally different from the situation. It is expected that oil prices will increase in the coming years. 

There are many reasons why oil prices will go higher. But whether someone trading oil futures or oil options in the market will make profit or loss is still debatable. Because an oil trader's profits depend on the commodities, trading strategy, trading indicators and more. But all these factors are not important to help you grow your oil trading portfolio. 

Therefore, we are here to explain the in-depth details about this trading market. 

Let's dive into green energy and oil prices 

The trading markets or financial markets out there always have a different environment. So everything that happens in one market does not necessarily have an impact on other markets. So here we have to talk about oil prices. We're going to talk about oil stocks, oil options, etc., in addition to currencies. 

Wall Street's preferences 

Traders who trade a commodity always look at the most traded financial instruments along with the Wall Street preferences. Undoubtedly, market volatility and liquidity always have an impact on crude oil prices. But there are some other factors such as preferences of Wall Street, which can affect the Brent crude oil price. 

The oil market and oil price can be affected by these preferences. So let's see how WS preferences affect commodity futures and heating oil. 

WS Prefers Renewable Energies 

Due to the global environmental situation, Wall Street mostly prefers renewable energy. Investors always recommend buying or selling renewable energy futures contracts, except natural gas and WTI. 

The more interest oil experts show in renewable energy, the more the prices of oil stocks, oil futures, rise. Still confused? We'll clarify. 

Oil producers face production problems 

Oil producers will face production problems as the demand for oil falls. This is the most important point to discuss for oil producers, oil producing countries, oil consumers and even oil traders. The oil companies will try to focus on renewable energy. This move will completely change the oil industry. 

The oversupply of renewable energy will reduce the supply of fossil fuels. As a result, the price of crude oil will increase because there will be less supply. Crude oil production will affect the financial market. 

Large-scale green energy projects will be focused on 

Before you think about the oil spot price, you need to know the market sentiment. The market sentiment about the oil market will affect the oil supply. 

The market sentiment completely indicates the growth of green energy projects. As the demand for fuel will decrease, the refining and production cost of oil will increase. 

Wind 

Wind energy is one of the oldest techniques found in the world as a renewable energy source. The futures market has not yet discovered it as the most useful energy source in terms of renewable energy. But, wind energy projects are being explored and implemented in many countries. 

Solar 

The most useful source of energy is solar energy. Many agencies and authorities like American Petroleum Institute, United States Oil Fund, Energy Information Administration etc. have already mentioned solar energy as one of the most emerging energies. 

Electric 

Electric cars, electric powered industries, etc. are already in use and growing at a good pace. This market can completely affect the oil commodity prices. Technical analysis completely says that this industry will take control of the automotive sector. 

Other 

There are some other renewable energy sources as well. Apart from the above mentioned sources, there are sources like natural gas and many more in use. The economic data shows that these sources will grow in the coming decades. 

Why will oil prices go up with green energy? 

If there will be no demand for oil, how will oil prices go up with the green energy transition? Well, there are deep insights that need to be discussed. Most traders in the oil market know that oil demand will not drop completely. 

Oil will still be needed, but oil companies will focus more on renewable energy sources. Below are the reasons why oil prices will skyrocket with green energy. 

Less production 

Since there will be less demand for oil, there will be less production. The companies or oil producing countries and OPEC countries will be there to reduce the production of the oil. 

Production Cost 

The cost of production of the oil will undoubtedly increase. This is because there will be less resources in the market to produce the oil. 

Supply problems 

There will be supply problems because there will be less productivity. Less production will lead the oil market to less supply. 

Less spending on oil production 

Companies or countries will be willing to spend less on oil production. Therefore, the price of oil will rise because there will be less supply. 

Investors increasingly focus on green energy 

All the investors in the major stock market, commodity market or any other financial market are betting on green energy. There are many reports about the market telling the world about the investors' interest in green energy

More projects coming from the International Energy Agency 

The international energy agency has suggested that many green energy projects will come up. These projects will attract the attention of traders, investors and even consumers. 

Which sectors will see the impact? 

Which sectors will see the most impact from high oil prices? Below are some key sectors that will be affected. 

Transportation 

The transportation sector is the main consumer of oil. Different types of oil and natural gas are used for transportation and this sector will have a major impact. Transportation based on green energy will be used more than oil. 

Most industrial sectors 

Industrial sectors that use oil or produce or refine oil will see a big impact. Most of them will try to transform into green energy industry. 

Sectors that are less affected 

Some sectors will be less affected by higher oil prices and increased use of green energy. These are the following sectors. 

Plastics producing industry 

The plastic producing industry, which uses oil to power machinery, etc., will continue to use oil in the coming decades. 

Local transport 

Local transport in small countries will not be able to switch from oil use to green energy. Therefore, local transport will continue to use oil in the coming decades. 

Summary - Green Energy Focus Might Push Up Oil Prices

Most of the traders out there who are involved with the oil market think that the future of oil is normal as they think. But the green energy or renewable energy sources will affect the whole market. 

Oil production, oil supply, oil demand and even oil consumption will be affected by green energy. It will make oil production more expensive and as a result, oil prices will increase. 
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