Oil in the twenty-first century is considered as the crucial part of modern world. It is used in most of the products considering from the automobiles to manufacturing to the cosmetics. It is one of the most important sources of energy and is considered as the ‘Black Gold’. As seen from the historical data from the global crisis, the price of crude oil has been increasing by more than two-folds. The price of European Brent Crude oil spot price was USD 34.16 per barrel on 29th December, 2008 and looking at the price of crude oil, it has taken momentum upward to USD 143 per barrel on 7th November 2008. Similarly, the WTI spot price rose to USD 112.38 per barrel on 28th April 2011 from USD 37.58 per barrel as on 26th December 2008. Both the price of crude oil is seen rising almost in binary multiples.

The crude oil being the afflicting product for the economy as the imports are rising and causing multiple effects through slotting in inflation as the oil prices are advancing day by day. A country without oil ores are running into the current account deficit. For example: India, a developing nation alone had imported 184.8 million tons of crude oil in the year ended March 31 for $144.3 billion, which was 7.8 percent of the country’s gross domestic product. Similarly, China imported a net 25.61 million metric tons of crude oil on September this year. Chinese oil consumption outstripped its production by 6.3 million barrels per day, and that gap had to be filled by importing and became the world’s largest importer of crude oil surpassing the US.

Since, the import reduction of crude oil is not possible in the current scenario due to high demand of crude oil and profitable oil extraction lacks, other measures are taken. The Asian countries have started to build reservoirs to store the oil during downward oil prices and increasing the stockpiles of crude oil.

The U.S. has a strategic reserve capacity of 727 million barrels. China will have emergency reserves of 500 million barrels by 2020 whereas Japan had 550 million barrels of stockpiles as at the end of August. Similarly, Indian refiners have capacity to store as much as 22.2 million tons of crude and fuels in tanks and pipelines and will climb to 30.82 million tons next year which is sufficient to cover for 70 days. Four caverns with a combined capacity of 12.5 million metric tons will be built at a cost of USD 2.2 billion with a motive of tripling its oil reserve.

The rise in the inventory of crude oil in the US this week led to the fall in the price of crude oil. Does the construction of oil reservoirs and stockpiling of crude oil in Asian economies support crude prices to fall or its just mimicking the US?