Black (Gold) Monday: Record One-Day Increase in Oil Price
In just one day time, the price of oil jumped by more than $16 dollars on Monday. The price of one barrel of oil started the day at slightly below $104 but when the markets in the United States closed one barrel suddenly cost $120.
Never before has the price of oil increased so much on one day.
Although we would normally cry when the prices of oil rise so much in just one day time, it’s actually good news this time. Or, better, it is a good sign.
The main reason for the increase was that investors were happy with the U.S. government’s decision to bailout certain companies in trouble. They first feared that the economy could collapse, which would result in a lower demand for oil. Now that the government is bailing out troubled companies, however, investors think (hope?) that the demand for oil will go up.
That’s the good news; there’s also a less positive explanation. It could very well be that investors aren’t sure about the bailouts. They may not be sure whether they will work. Therefore, instead of taking risks, they decide to buy stocks in reliable companies; if oil companies are anything, it’s reliable.
Having said that, the main reason for the sudden increase is hope on the side of investors. Hope that the rescue package will work, and hope that the U.S. government will do more to revive the economy if necessary.
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