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Effects Of Oil Prices On The Economy

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In his book, Black Gold: The story of Oil in our lives, Albert Marrin said, “By the fall of 1918, it was clear that a nation’s prosperity, even its very survival depended on securing a safe, abundant supply of cheap oil.” Crude oil is one of, if not the most important commodity in the world. And it has become something that is highly tied to the global economy as a result. The rise and fall of oil prices are used as indicators of what’s to come and how to prepare for it. The very prosperity of some nations is directly indeed directly tied to oil production or procurement. In this paper, I will be discussing the effects of oil surplus and shortage on the economy as well as the effect of oil prices as well. I will also be looking at the effect of recent development, new technology and oil substitutes on the industry and the economy by extension. Oil prices and the economy have always had an effect on one another. We only need to look back, and we will see several examples of different periods in time when this has happened. One of the biggest factors that affect the price of oil is geopolitical events. Oil prices tend to soar whenever a particular area that is a big supplier of oil is embroiled in any type of conflict. Conflicts such as civil wars, potential wars with neighboring countries or even event such as a political election that could result in potential unrest in the region usually cause oil prices to rise globally. These economic, military and political factors
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