The Price Of Oil Prices

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.”

Within the last year, oil prices in the United States have dropped significantly. As oil drilling in the United States has reached its highest level in over 30 years, consumers are reaping the benefits. Among these gains are record-low prices at the pump, and cheaper oil to heat homes. However, oil prices did not just drop on their own; multiple factors contributed to the fall. Increased domestic production, declining global demand, and competition from other oil-producing nations had led to rapidly dropping oil prices across the United States.

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 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

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 many of Europe’s economically struggling countries the increase in production of oil which in return yields lower prices has benefitted them. Europe’s weak economy is able to contribute to this drop in oil prices in that Europe’s currently low inflation rate and weak economy has greatly lessened the demand for oil. The lack of demand for oil in one of the most prominent import continents in the world has forced oil manufactures to lower their prices in order to retain Europe as a top oil export. Large oil exporters do not want to lose Europe as an export because that would also mean losing billions of dollars per year.

Oil and gasoline prices follow a trend that sparks mixed reactions from different industry stakeholders in the America’s economy. The trends on oil and gasoline and their stability have immense impact on the performance of the economy based on their primary as energy. The government’s ability to ensure stability in price movement is seen as a key step towards fostering steady economic growth. A variety of factors are at play in the determination of these trends exhibited by the oil prices in America. Some of these factors are attributable to the market forces and understanding them would be instrumental in resolving economic problems resulting

Over the longer-term, some of the major trends that affect the price of oil are consumption for business and personal use. For example, Anderson and Boul (2005) note that China's economic growth has resulted in that nation having steadily increasing demand for oil. Much of this comes from growth of the country's consumer class, with automobile sales, and from growth in industrial uses for oil. India, the US, and the world's modern economies are all big users of oil, so the drivers of demand in these nations can have an impact on world markets for oil.

In this text, I concern myself with the contents of two articles based on recent microeconomics issues. During the last two months, the price of gas in the U.S. has been on an upward trend. Taking into consideration recent happenings on the international scene, this trend could have been triggered by many different factors. The articles I make use of in this case discuss the rising oil and gas prices.

What affect does the price of oil and gas have on the economy? How does this affect the daily lives of the entire population? The preceding questions are the basis for the enclosed report. The primary objective of this report is to give a few reasons as to what causes prices of oil and prices of gas to rise. Among these reasons, speculation of things that may or may not happen, like a terrorist strike, is one of the leading factors. Another reason for the continued rise in prices of oil and gas is the constant growth that China is experiencing in population and energy consumption.

It is often said that oil price shocks affect business cycles, triggering a detrimental effect on the economic activity of some countries when they rise and a favourable effect when they fall. One instance could be the U.S., where the data suggests that most recessions after 1973 have been headed by oil price increases, which is often taken as evidence of recessions being caused by oil price shocks. This brings up to question through which channels oil price shocks might be transmitted to economic activity, to what extend specific countries and the global economy can be affected by oil price shocks and whether there is a coincidental relationship between oil prices and recessions as a result of a correlation of the former with other

The global oil prices have fallen sharply since the second half of 2014, which has led to a series of economic problems. Oil prices have been stable from 2010 until mid-2014, remaining at around $110 a barrel (BBC News). However, prices showed a sharp decline since June 2014 and have been more than halved now (BBC News). Brent Crude oil is priced below $50 a barrel and US crude is dipped down to below $48 a barrel now (BBC News). Oil prices shock is making the whole oil industry straggling. In particular, oil producing and exporting nations including Russia, OPEC (especially Venezuela and Saudi Arabia), and United States are the major victims in the oil prices shock. They are suffering from a fallback in their economy development due to the significant revenue shortfalls. Russia is suffering from a significant economy recession (BBC News). Brad Plumer points out that economy in Russia is “facing a potential meltdown”; Venezuela is “facing unrest” and “may default on its debt”; and Saudi Arabia will face heavy pressure if the price remains low even it has prepared for the shock (par. 7). Nonetheless, low oil prices are welcomed by oil importers like Europe, Asian countries, especially China, Japan, and India because they can pay less for oil. Europe’s flagging economies are characterized by low inflation and slow growth, receiving 0.1% increase in economic output when a 10% fall happened to oil prices (BBC News). China, the largest net importer of oil is surely benefiting

Curde Oil price affects on economy is different in different country. In general, low prices are considered good for importers of oil because it not only improves consumer spending but also improves the trade balance of a country. Therefore an increase in oil prices has a considerable negative impact on the GDP growth country which imports oil. Whereas drop in Oil Price is bad for oil exporters as it could put a pessimism in revenues of oil exporting countries where crude exports play an enormously significant role in economic growth. Moshiri &Banihashem (2012) concluded that many oil-exporting countries are heavily dependent on exports from oil revenues, so when oil prices are low, their economies suppress, and when oil prices are high,