Oil Prices And Stock Market Essay

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.

From tornado results at all fields, oil price is a dominant factor affecting NPV and GT values. Hence, from both government and investors view, oil price fluctuation is a crucial thing to consider.

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

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

When comes to commodities and the stock market, investors are quick to blame oil prices for causing market volatility. Granted this is case more often than not, other commodities such as corn and gold have a tremendous impact on daily stock prices. Global commodities are typically broken down into 4 basic headers; energy, metals, agriculture, meat & livestock, and consumer. Energy, as we know, watch the most heavily scrutinized assets including oil and natural gases. Metals, on the other hand, track our most precious assets, gold and silver. While agriculture, meat & livestock and consumer observe corn, coffee and live cattle to name a few. Since commodities, and not just oil, are key inputs of many goods, they have a profound impact on

As it may be grasped from the graph, crude oil price reached its maximum in 2008 and constituted as much as $91.48 per barrel (IBP Oil, 2011:1). The period from 2002 to 2008 was marked by the gradual rise in crude oil prices. In 2009, the indicator was equal to $53.56, and oil prices started growing again (IBP Oil, 2011:1). It may be argued that fluctuations in crude oil prices are also the result of economic influences. It is obvious from the graph

Economist has analyzed the causes of decline in world oil prices. Typically, the price of oil is determined by demand and supply of the world market and forecast advance to invest in which level of demand depends on the level of economic activity and behavioral use of energy from humans. The oil price decline has a benefit for oil importers like China, India, Japan, Europe but unfortunately for oil exporters such as: Kuwait, Venezuela, Nigeria, and Iraq. Crude oil prices fell steadily in the past seems to be a result of two main factors being the levels of demand declining and a level of increased supplies (Economic, 2015)

Shocks to the demand and supply of oil, caused by politics, business changes and cycles, and technological advances, cause oil price volatility across world economies. These factors explain the fluctuations that the global oil industry has faced since early 1990s (Aasim, 2015: 5). The economic boom between 2003 and 2008 caused an increase in oil prices, especially in oil-consuming economies such as India and China. On the contrary, petrol exporting nations could not match the high demands for oil. Oil prices increased during the 2008 financial crisis, picking up again in mid-2009 after the developing economies showed signs of economic growth. Oil supplies would later be disrupted by the Arab Spring uprisings in 2010 after which oil prices rose up to between $90$ and $120 per barrel between 2010 and 2014 (Baumeister & Kilian, 2016: 54). As supply exceeded the demand, oil prices would drop by 70% between June 2014 and January 2016. Thus report discusses the effects of oil prices on the aggregate demand and aggregate supply of a petrol importing nations.

It has been documented that a change in crude oil prices can lead to an economic depression, which could in turn weaken asset prices. Weaker asset prices will lead to devaluation in a company, which will lead to a

Another reason for the increase in late 2005 can be given by the strong hurricane season in the US.

A sudden increase in oil price becomes a concern for the consumer as it results into a reduction in his purchasing power; thereby struggling with allocation of income among competing demands. For an investor, high price volatility increases risk associated with the investment and also creates uncertainties. High volatility will impact the macroeconomic variables in an economy including but not limited to unemployment, inflation, consumption, investment and industrial output (Ebrahim, Inderwildi et al. 2014a).

The price of Oil has inflated over the years as the fossil fuel is slowly running out, there has been a rise in prices as supply falls. When a commodity becomes scarce its price will rise. The price has also risen as demand has increased from countries like China who are producing more goods which are demanded by consumers.

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.

The purpose of this paper is to know the factor that make the crude oil price change, because for the last five years, the crude oil price was on the downhill.

5.4 RESULTS AND DISCUSSION Firstly, the data on oil prices is taken from Multi Commodity Exchange of India (MCX). The time period of the data is from 2011 to 2013 as this was a period of high volatility in oil prices and Multi Commodity Exchange of India (MCX) commenced trading in crude oil futures on February 9, 2005. The dataset includes crude oil spot prices. MCX is a demutualised commodity exchange with permanent recognition from the