Impact of Oil Prices and Other Macro Economic Variables on GDP

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

However, in the economy of an oil-exporting country, AD will likely be high due to high profits when exporting oil to foreign consumers. This would mean that there will be an increase in the balance of trade due to an increase in (X-M) causing the AD curve to shift rightwards causing demand pull inflation. In order to produce more output to meet the increased demand, firms are forced to bid for increasingly scarce resources, raising their costs. They therefore require a higher price to be willing to supply more. With exports rising, the price elasticity of demand is low and there is a relatively small decrease in quantity demanded for oil. Therefore export revenue will probably rise, resulting in an improvement on the current account.

A group of researchers show that oil price fluctuation have significant impact on the economic activity. The significant are expected different from oil importing and exporting countries. (Soytas, Sari, Hammoudeh, & Hacihasanoglu, 2009). However, those countries exporting oil an increase in the oil price considered good news to them. When the price of oil increase the exporting, countries gain more money, but for importing countries when the oil price decreases, it’s going to have an impact on their real economy especial when the country relies on the oil as one of their main source of income. The monetary transmission mechanism which has the control on the interest rate which the oil price have has an impact on

Crude oil is the one of the most important natural resource of the industrialised nations, which could generate heat, drive machinery and fuel vehicles and airplanes (years, someone). Moreover, the crude oil components are used to manufacture almost all chemical products, such as plastic, detergents, paints and medicines (years, someone). Also, it plays a significant role in expanding technical ability to discover new sources and extending the production lives of existing oil fields. Therefore, constant changes in the price of the crude oil have an impact on a global economy (years, someone).

In this empirical project I will try to explain the relationship between the oil prices, gold prices and stock market in the United State using yearly time series data. Since the gold and oil prices are raising their influence on stock market is also increasing and we will see how fluctuations in oil prices and gold prices impact the stock market in the United States. So here oil prices and gold prices will be our explanatory variable and stock market index will be our explained variable. In this study we will use multiple regression analysis to explain the relationship.

This paper seeks to examine the relationship between oil prices, exchange rates and stock prices of these two countries through a financial market perspective. The gravity and intensity of which contains invaluable information for investors, corporations, policy makers and governments.

Since summer 2014, the price of oil in the global market has drastically fallen. As measure by the U.S dollar, oil price has declined by around 50 percent from last year. The declining oil price is widely deemed as the effects of the increasing oil supply and decreasing demand in the global market among other factors. Future pricing predictions indicate that the price of oil will hardly be restored the level it was in recent years. The focus of this paper is to describe how the basic supply and demand mechanism has contributed to the decline in global oil prices and the subsequent effects of the prices on various national economies.

In the recent years, overall demand growth for oil is strong in Asia pacific region and North America. The consumption of energy resources in major developing and industrial countries, namely, China, India and Brazil is expanding rapidly, but on the other hand, G7 countries where most of the demand of oil are consumed, demand for oil has been static and seems to be reduced from last few years. In 1990s, U.S and G7 countries were top consumers of oil, at present BRICs countries and China, are becoming greatest consumers of oil, although G7 countries and U.S are reducing their demand as compared to past two decades but still their demand is higher even from BRICs and China.

Since the past few decades, owning a car has become a necessity in order to commute from one place to another. However, cars do not work automatically, they require fuel. Since the past decade, the petroleum industry has become one of the leading industries impacting the nation’s economy. Oil has become an essential commodity as it is utilized in transportation vehicles, serves as a raw material for manufacturing plastics, and is utilized in homes for cooking. America’s economy is greatly dependent on petroleum as it is the “black gold” of the nation. The considerable significance of oil has led to the drilling of it, which is not only limited to land, but also the oceans. Offshore drilling is a method in which petroleum is extracted from underneath the seabed. It is one of the significant technological advancements in the past few decades. However, the ones who are involved in the process of offshore oil production are humans, and humans tend to make mistakes. In 1969, due to a human error, an oil spill occurred and natural gas, oil, and mud shot up the well and oozed into the ocean (“Offshore Drilling”). The oil spilled led to an environmental disaster which killed thousands of marine animals and distorted the environment. In order to prevent the same error, the government passed a moratorium in 1981, banning more than 85 percent of the country’s oil drilling sites (“Offshore Drilling”). The moratorium restricted the United States to mass-produce its natural resource.

Oil has become the means of survival for both consumers and producers. Consequently, the fluctuations in the price of oil have become one of the greatest concerns in the economy. According to Branginskii, ‘the market of energy carriers, primarily oil, are a great threat to world economy. Lack of clarity with crude oil prices

We go to know on the ecuadorian oil situation, his commercialisation to national and international level, analyse the diverse systems of exploitation that at present are treated of unsuitable form and with big deficiencies in the state field Know on the functions that operate at present in Petroecuador, and his result in the Ecuadorian economy. Know those who find mayormente benefited with the resource of the oil in the Ecuador, and as they find structured said advantages as they were the one of a good economy in the country and now is a difficult very high that are crossing. In our country the fall of the price of the oil would mean that the ecuadorian debt will keep growing by several reasons, between them, the prices that renegotiated with the companies devoted to the activity in the country, after the extension of the agreements. In this subject will speak about the situation that is living our country Ecuador and the diverse factors that influence so that the oil go down of price and as this keeping in the actuality.

Flashback to your macro 101 class and you know that exchange rates effects a number of outcomes in the global economy. Most importantly, exchange rates affect inflation through a number of direct and indirect channels. If the U.S. dollar appreciates, this directly causes the price of imported goods to decline. Conversely, a higher exchange rate makes it harder to export goods overseas. Since commodities are quoted in U.S. dollars, any domestic exchange rate shocks also impact the commodities market. Like exports, a stronger dollar makes it more expensive for

Hamilton (1983) stated that the correlation between oil price evolution and economic output was not of a historical coincidence for the 1948-72 period. An increasing oil price was followed 3-4 quarters later by slower output growth with a recovery beginning after 6-7 quarters. These results also apply to the period 1973-1980. The negative effect is more distinct in inflationary times. It wouldn’t have been possible to anticipate these reductions in real GNP growth on the basis of the previous situation of output, prices, or money supply. In general, Hamilton’s results have been confirmed by several subsequent studies. In 1986, Gisser and Goodwin indicated for the analyzed period from 1961 to 1982 that the oil price hadn’t lost its potential to predict GNP growth.

This report will be focusing on the above question to determine how both the rise and fall in the prices of oil has affected the aggregate demand and aggregate supply of a nation that relies solely on oil for its revenue. The report would clearly shows the Aggregate Demand (AD) Curve in respect to its effects on the oil-exporting nation, United Kingdom. The cause of oil prices drop and impacts of the economy due to shift of the AD and will demonstrate on a diagram form. The brief of United Kingdom governments’ budget due to oil prices drop. This report will also follow by some recommendation and conclusion.

It goes into the relationship between oil prices and macroeconomic fundamentals, including economic output and value and volume of international