The Advantages and Disadvantages of Trading Crude Oil in Commodity Market

Trading in the worldwide market is one of the fastest ways to earn big money nowadays. But, the question is, will it be easy to join in and understand the processes of trading? The answer lies in the traders’ capacity to absorb the rules and regulations in the trading market. Commodities are one of the major trading assets in the market which can be divided into two kinds. Commodities can be soft commodities or hard commodities. How do commodities differ from other tradings in the market? A commodity market is a kind of market that primary trades in the economic sector instead of the manufactured products. A soft commodity can be agricultural products like coffee, wheat, sugar, and cocoa while a hard commodity can be gold, silver, oil, and other mined minerals. In the worldwide market today, about 50 commodities are accessed by the investors through their financial transactions.

The Advantages of Trading Crude Oil:

  • Crude oil is very accessible and widely used. Oil is one of the most important commodities in the market since it is widely distributed in all parts of the world. There are available gigantic infrastructures that transport oil through pipelines, tankers, and ships to a lot of places. In other words, it is accessible worldwide.
  • Crude oil has a high energy density. Even a small amount of oil can produce large amounts of energy since it has a high energy density. It is very useful to power up automobiles because of its energy density.
  • Crude oil is easy to produce and refine. Most of the low-cost oil locations are already depleted because oil is quite easy to produce once its location is detected. Now, oils can be mined in tar sands and off the coast in the seas. Furthermore, the refinery technology of oil is already practiced for a long time, which means refining products like petrol, and diesel is quite easy nowadays.
  • Crude oil is very reliable and a constant source of power. Compared to other sources of energy like wind and solar, oil has a higher level of reliability since it can produce energy within 24/7. Engines that also use oil are very reliable and have a mature technology.
  • Crude oil is useful in many kinds of industries. Besides from transportation, oil is also used in other kinds of industries to produce their finished products whether is clothing or medicine.

The Disadvantages of Trading Crude Oil

  • Crude oil causes pollution. Oil spills from oil tankers cause pollution in the bodies of water, which results in the death of much marine life. Oil spills usually happen when an oil tanker transport them through ships that lead the oil.
  • Crude oil emits harmful substances in the environment. Crude oil releases carbon dioxide that causes global warming to earth. It also produces carbon monoxide, acid rain, and sulfur dioxide that harms the entire population of the earth.
  • Crude oil refining can lead to the production of harmful products. Refined oil can produce harmful products to the environment like plastics, and other harmful solids and gasses.

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