Essay On Oil Shocks

Oil is the product that each and every one of us use. It can be used for fuel, heating and even cooking. The most often known for unstable price is crude oil or gasoline. According to the The Economist, The main reason for price shifts of oil is oversupply. The oil production in Saudi rose 10.3 million barrels per day. This increase is the effect of a new method that I being applied to oil extraction. This method is called fracking, fracking is where they drill into tight-rock formations then gradually turning horizontal for several thousand feet more. This results to accommodations to multiple oil wells. This new approved method of oil harvesting has raised the productivity gains and reduced the cost of harvesting oil.

In 2016, the crude oil price movement prices were unpredictable. The OPEC reference basket dropped 10 percent to $43.22 per pound. The ICE Brent and NYMEX WTI both went down by 8.4 percent with ICE Brent at $47.08 per pound and NYMEX WTI at $45.76 per pound. This showed that there were uncertainties in the petroleum market. The future prices were predicted for 2017 that it would move higher. The World’s economic growth predictions was the same at 2.9% for 2016 but increased to 3.1% for 2017. Because of the 3rd quarter of 2016 in Japan and US, the OCED growth went from 1.6% to 1.7%. The demand for oil growth in 2016 has been increasing slightly to 1.24 mb/d. In 2017, the demand will be predicted with a decrease to 1.15 mb/d. OECD will

Oil price increases are generally thought to increase inflation and reduce economic growth. In terms of inflation, oil prices directly affect the prices of goods made with petroleum products. As mentioned above, oil prices indirectly affect costs such as transportation, manufacturing, and heating. The increase in these costs can in turn affect the prices of a variety of goods and services, as producers may pass production costs on to consumers. The extent to which oil price increases lead to consumption price increases depends on how important oil is for the production of a given type of good or service.

The consensus from the 1970s and 1980s was that there was an inverse relationship between oil prices and real economic activities. This belief later changed when the oil price crash of the mid-1980s failed to boost economic growth. Researchers then believed that increasing oil prices negatively affect the economy whereas falling oil prices have very little impact and by the 1990s this impact was assumed to be minimal (DePratto, de Resende and Maier 2009). More recently, researchers have found that increases in the oil prices adversely affect the economy whereas the impact of a decline in oil prices on GDP growth is only negligible (Jimenez-Rodriguez and Sanchez

Economically, the oil industry will only pull us down as a country. Professionals believe that even though oil prices are falling, the production will start slowing and the prices will skyrocket again. The typical consumer would see that the price of oil barrels has fallen from one hundred to eighty dollars in the past year, but the consumer will not see the impact it will have outside of gas prices. Back in 2005, sixty percent of U.S. oil was imported, and the effects of a drop in prices would have been observed in the countries that we imported from. Today, however, only thirty percent of our oil is imported. With such a high amount of domestic oil, the low prices impacts the American

The United States consumes more than 25% of the world’s petroleum products which is a large percentage, considering only 3% of the world’s oil reserves are produced by the United States. Given the demand for petroleum products such as gasoline, understanding why Crude oil prices have skyrocketed in recent years, is not hard. According to the article “Ending America’s Oil Addiction,” the surge in crude oil prices can be reduced in large part to the simple concepts of supply and demand. (Cooper, 2008)

The gas and oil prices impact all the sectors of the economy; including transportation and

In a revealing article by George Perry (2001) the author discusses the economic impact that a disruption in the oil supplies would have on world oil prices. He states “Currently 28 percent of the world's crude oil comes from the Organization of Arab Petroleum Exporting Countries (OAPEC) consisting of Arab Muslim nations, some of which are not part of the OPEC cartel. The governing regimes in all these countries are at some risk [due to the war on terrorism].” He goes on to state that in a worst case scenario the economic consequences of oil supply disruption would be “oil prices rise to $161 per barrel driving gasoline price to $4.84 per gallon. The increase in the nation's bill for products of crude oil rises by about 10 percent of GDP, which adds perhaps 15 percent to the inflation rate in the first year. And the recession is the steepest and deepest of the postwar period, with GDP declining nearly 5 percent the first year.”

This report will consist of the causes and consequences of the changing price of WTI crude oil and recent trends in the global price of oil. It will also include the effects of the ever-changing price of oil on individuals, business firms, governments and the economy.

The demand for oil has been predicted to increase despite the high price of oil. Sources of the demand for oil continue to increase with time worldwide. As countries industrialize and develop, their oil consumption increases together with their economy. Examples of countries that have their economy growing fastest and steadily are India and China. These two countries have their economy growing and the impact their economic growth has on oil demand is great. Some developed countries are also about to change their habits on oil demand. This will be likely adapted faster if the prices of oil continue to rise. Oil prices are determined by the traders and speculators who control and manipulate the future oil market (Anderson, 1).

Oil prices affect most American's daily lives. Whether it is used to fuel your car, a plane, to heat your home, or even if it is just used inside products, like plastic that we use daily, oil plays a role in all of our lives. Last year, in 2015, an extreme decline in gas prices swept the United States. For example, oil prices have decreased to less than $30 a barrel which is the lowest it has ever been in 12 years. There are many factors that can contribute to this sudden decline in gas prices, but their are three that are the most relevant. These include, the recent advancements in other fuel sources, the changes in the leading oil suppliers of the world, and the simple economic concept of supply and demand. These three ideas are all important in contributing to the fall of gas prices.

Oil prices hike or drop is normally a major concern to researchers, industries as well as the government. Oil majorly affects the operations of all sectors of economy in any nation. From analysis and monitoring of oil prices, it has been observed that oil prices went down from the second half of 2014. This was unexpected because oil prices had stabilized for about four years with each barrel costing 105 US Dollars (Miller 11). According to a research and simulation done by researchers in 2014, there was a prediction speculating oil prices would remain low in 2015 and marginally rise in 2016. However, in 2015 there has been a very sharp decline of oil prices. It is out of this concern that this papers the aims at addressing the following questions.

A rise in oil prices impacts Lesser Developed Countries (LDCs) negatively. Not all countries in the world are as developed as the United States, Britain, and Japan. Many countries only recently have begun modernizing. A huge factor in the rate of modernization is the price

There are two primary factors influenced the market of energy: population and economic output (Exxon Mobil, www.exxonmobil.com). According to International Energy Agency (International Energy Agency, www.oilmarket.org) global oil product demand will rise up from 84.5 mb/d in 2006 to 86.1 mb/d in 2007, and in forecast for 2030 will grow 1.8% per year. The world oil prices are forecasted to decline from $68 per barrel in 2006 to $49 per barrel in 2014, then rise to $59 per barrel in 2030 ($95 per barrel on a nominal basis). Total world liquids consumption rises to 118 million barrels per day in 2030.

World oil demand is increasing as emerging economies need more energy to increase their living standards. Estimates, shown below, are that by 2030, China and India as emerging markets will import over 70% to 90% of their fossil fuel needs (1) . Coupled to a continued high and growing demand for oil, makes this a robust market for the next 30 years.