The markets are in serious trouble as the extreme oil price volatility continues to devastate the global economy. Investors and analysts today are totally clueless because they have become the frogs burnt to a crisp in the frying pan. Over the past several decades, the oil price has fluctuated tremendously, much like the EKG of an individual whose vital signs have run amuck.
Unfortunately, no seems to notice, and no one seems to care (George Carlin). However, the market and traders have grown accustomed to the volatile trading insanity as the oil price rises and falls 3-5% in a day. Today, the West Texas Intermediate (WTI) Crude oil price has been down more than 4%:
And if we consider that the oil price was trading at $74 just last week, it is now down a stunning 8%. However, if we look at the oil price over a six-month period, the price fluctuations are even more significant:
When the stock markets suffered a correction at the end of January, the oil price fell 12% in a matter of a few weeks. And more recently, the oil price shot up 15% from a low of $64 to a closing high of $74. This huge 15% increase took place in the last two weeks of June.
With the world producing and selling 80+ million barrels of oil per day, large oil price fluctuations cause a great deal of stress in the overall markets. According to the study on Oil Price Volatility: Causes, Effects, and Policy Implications[1]:
Sharp, rapid swings in the price of oil can have outsize effects on companies, economies, and global geopolitics. Oil price spikes can stunt economic growth, for example, and a sudden price plunge...