Both oil and gas are an essential to every person on a day to day bases. Gasoline and oil is used to power so many things. From motor vehicles, to a lawn mower, to a chain saw. There are a lot more products that depend on oil, and some products are even produced to function off of both oil and gas. Oil has become one of the most sources for energy in the world, right behind of coal. The first commercial oil began in the 1850’s where it was established in Romania. Many would say the official commercial oil was introduced in 1901. Reason for this was because it was the first commercial that produced oil for mass production. The demand for Oil began to increase more and more especially when the industrialization era began. Gasoline was discovered but never officially used by people. Gasoline’s demand rose during the 1890’s when the invention of vehicles began. The demand increased especially around 1920’s when countries like the United States had about 9 million vehicles on the road.
http://www.investopedia.com/articles/economics/08/determining-oil-prices.asp
Fracking is important when it comes to the pricing of oil and gas because opportunity is increasing. So what is fracking and why is it so important that it is a determinant for the pricing of oil and gas. Fracking is the method of finding oil that is trapped inside and between rocks. Rocks that are buried deep under the ground, about 6,000 to 10,000 feet deep under ground. What happens is, you must drill under the ground with special heavy machinery. Of course every land is not the same so some places you will be able to drill very deep, while in other areas you may be limited. After drilling straight down, you will begin to turn and drill horizontally to get under rocks. You must drill with high pressure water so that it can open up the spaces between rocks. Once you have drilled with high pressure water, you will begin to use sand at high pressure so that the sand can get into the opened up spaces and let it stay open. This process allows the oil and gas to escape through the channels that are inserted into the ground. This oil now becomes usable and beneficial financially.
Fracking is a reason why oil and gas prices have decreased significantly, especially now that gas is around two dollars per gallon. With the method of fracking, it provides a new recourse for gas and oil making the price of gas and oil from commercials to decline. People, or companies do not have to depend on going to commercials only, they can now consider buying it off other companies that are involved with fracking. Although fracking has helped decrease the prices of oil and gas globally, it has also become controversial. People argue that fracking is a very expensive method of getting oil and gas. People also argue that fracking contributes to the pollution that already exists in the world. Finally, another argument is that fracking can cause earthquakes to go off.
Another reason why the price of oil and gas have decreased is because demand has decreased globally. You have to consider the fact that oil and gas are extremely correlated to the world’s economy. What is happening is that supply is beginning to increase causing the demand to decrease. There are individuals or groups who are considered either hedgers or speculators. Hedgers are the ones who buy in bulk right now so that they can avoid from buying at periods of gas and oil being at a high price. What happens is the buyer and the seller of oil and gas come to an agreement to sell the gas or oil at specific dates at specific prices, no matter what are the current prices. The sentimentalized people are those who determine the price of oil and gas based on what they think will be the prices in the future. For example, the seller may believe in the future the price will rise significantly. This means he will decide to sell the oil or gas at a high price because they believe it will benefit them later on.
http://www.investopedia.com/articles/economics/08/determining-oil-prices.asp
http://ecowatch.com/2015/12/16/fracking-gas-prices/
https://www.eia.gov/energyexplained/index.cfm?page=gasoline_history