Oil Commodities | Oil Commodity Becoming a Commodity

When I used the play on words concerning oil commodities and oil becoming a commodity, I mean it in the sense of something that has no competitive advantage at this time.

In business in general, to become a commodity product or service, means you no longer have a moat to protect you, and you're vulnerable to those who can run operations better than you, as you only compete on price.

As far as oil goes, the demand for it is becoming slow low because of the horrific economic turmoil, that even low prices can't get people to travel more and vacation, as fears are keeping them close to home and thinking of ways they can do things for less. That isn't going to change with crude futures prices any time soon.

The latest projections from the International Energy Agency confrim this, saying oil demand will be at the lowest levels since the early part of the 1980s.

Much of the projections for oil commodities demand is based on the number for the first quarter being much lower than it was thought they would be, and so now forecasts are that over 2009 oil demand will come in at about 83.4 million barrels a day globally. That's a huge 2.4 billion barrels of oil a day less than 2008.

There is a growing consensus that oil commodity demand will not rebound until 2010. There is still room for global economic contraction, now expected to drop by 1.4 percent this year.

All of this means oil prices will continue to stay down, and even if they don't, it won't matter, as the oil commodity prices we're now experiencing, along with falling oil demand, tells us that no matter what happens to prices, until economic contraction stops and a real recovery begins, oil will continue to be a commodity in the sense of having a lot of it, but many not willing to over spend on it no matter what the price.

Other than oil contango, there's not really much to get excited about for oil while its in its commodity status.

Hopefully you understand what it means when oil commodities become a commodity, as we're in that stage now, and until that changes, it won't matter what temporary bumps and swings happen, over time demand will continue to stall, along with oil prices.

We are definitely seeing one of the weakest oil commodities experience in a long time.