Fluctuations Of Oil Prices And Its Impact On Usa Gdp Growth

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

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)

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.”

Discuss how rising oil prices might affect the macroeconomic performance of an economy. (25 marks)

For example, the Intercontinental Exchange while oil prices have not been decided on by oil producers such as Niami refinery fires, Nigerian Pirates and global oil markets. The laws of demand and supply are also predicted by the increase and decrease in the prices of oil. Oil prices are driven by the increase in demand for oil which has limited or completely destroyed the gains for suppliers and producers. While the U.S still consumes more oil than any other country, it is evident from the increase in oil demand that developing countries such as China, India and Japan are driving oil prices higher by their continous growth in oil demand (Anderson, 1).

This research paper provides an overview on why there is oil price falling in the United States. It will examine the reasons that are influencing fall of oil prices. Additionally, the paper will seek to explore the effects caused by the fall of oil prices in the American’s economy.

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

Graph 1 represents the major companies and nations which product crude oil. It also represents how the bent crude oil price has fluctuated from 2004 until 2014. From 2004-2008 it is evident that there is a steady rise in oil prices, from $35-$150 per barrel. Towards the end of 2008 it is evident that there is a significant drop in oil prices, from $150- $32 per barrel. This is due to the Global Financial Crisis (GFC) where the stock market collapsed on October 28, 1928, through this came the rapid decrease in oil prices. From 2009-2011 there is a steady increase in oil prices which was caused by the stock market repairing itself from impact of the GFC. In 2013 we are able to see declining oil

Shale revolution started about ten years ago due to technological developments such horizontal drilling and hydraulic fracturing. The increasing exploitation of shale oil significantly affected the oil market. In this report, WTI oil price was predicted over the next five years using historical data. A discussion of major factors that historically affected oil prices is presented. Historical events were linked to current and expected future events to evaluate the predicted prices. To further evaluate the forecasted prices, they were compared to the predicted prices by the Economy Forecast Agency.

With the current spike in oil prices, many American consumers have asked, 'what is going on?' In order to fully understand the current situation and how it is affecting the economy one must look at a variety of factors including: the history of oil crisis in the United States, causes of the current situation, and possible outcomes for the future. It is only after meticulous research in these topics that one is prepared to answer the question, 'what is the best possible solution to the oil crisis?'

Anybody from Texas who drives a truck has felt glad about paying less money in regards to purchasing gasoline at a gas station. The truth is that the price of gasoline has been dramatically affected by the recent plunge in oil prices. There are different theories that explain the reason of this phenomenon. This paper will analyze the current oil market, as well as the key players who are winning the “war” of the oil prices.

At present, the world, including U.S. has been undergoing a recession. Many U.S Company and firms have disappeared because of the world-wide recession. One the other, companies industries, like mobile device production, Social Network Service and cigarette production, somehow managed to survive and have been doing great performances so far. Many industries prospering and emerging, are industries with high technology products with online services. To be specific, thanks to technology in the oil industry, there was the incredible method to get oil such as sail oil, which made a big change in this industry. According to an article of oil price, the U.S crude decreased by less than $43 barrel Monday to $42.85 for the first time

Price is depended on supply and demand. There are two different laws: The Law of Demand and the Law of Supply. The Law of Demand is a relationship, which involves price and quantity. It states that as the price of a product goes up (oil goes up), the quantity of the product (oil) will go down; therefore, this is a strong relationship between price and quantity. The Law of Supply, however, is the direct relationship between price and the quantity in which the seller produces. So as price goes up, the quantity the seller will produce will go up because the price allows for the seller to produce more output. Demand shifts are caused by economic growths. Economic growth is an increase in the capacity of an economy to produce goods and services, from a certain

Figure 5 shows how the United States has a developing oil production that U.S. is the largest oil consumer in the world. When the largest consumer produces a massive amount of oil it will influence many countries that depend on the revenue budget from oil exports. “The United States added almost 1 million barrels per day of oil production between 2012 and 2013” (Ratner, Tiemann, 2015, p6). With this production of the United States effects the oil prices in the global because the U.S. imports oil decreases and the supply of oil in the world increases.

Golub (1983) and Krugman (1983) in their individual works concluded that oil exporting (oil importing) countries may experience exchange rate appreciation (depreciation) when oil price rises and vice versa. A depreciation of the USD reduces the oil price to foreigners relative to the price of their commodity in foreign currencies, thereby increasing their purchasing power and oil demand and in turn, pushing up crude oil prices in USD through the law of one price for tradable goods Bloomberg and Harris (1995). The positive correlation between oil and exchange rate dependence found in studies indicates that oil and currency markets move together and differs across currencies. Gasser and Goodwin (1986) found that crude oil prices has a significant impact on a broad range of macroeconomic indicators and this effect exceeded that of fiscal policy and sometimes exceeded that of