The Volatility of Crude Oil Prices

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The volatility of crude oil prices have been experienced since the end of the 20th century. The March 1999 spikes were experienced due to the restriction of crude oil production and cooperation among OPEC member states, the growth of oil demand in Asia that signified its recovery following the Asian financial crisis and decreased production from non-OPEC countries (Al-Abri, 2013). The world market reacted with a sharp rise in prices with the increase in crude oil going beyond 30USD/barrel in the last quarter of 2000 (Chen, Hamori and Kinkyo, 2014). OPEC countries tried to stabilize prices through the increase or reduction in production to a range of 22USD per barrel to 28USD per barrel (Ghosh and Kanjilal, 2014). The incident on September 2001 caused a deep reduction in crude oil prices, irrespective of earlier decreases in production by exporters that are non-OPEC and quota reduction by OPEC countries. After a short while, prices rose to 25USD per barrel with prices going beyond this in 2004 to about 40USD per barrel (Jimenez-Rodriguez, 2011). Factors linked to the rise in the price of oil include the continuous fall in the value of USD and subsequent Middle East tensions, China’s increased demand for crude oil and the uncertainty of Russian’s producer, Yukos (Chuku, 2012). The 2008 banking crisis, which was a consequence of the financial crisis, reinforced significantly the cyclical downturn. After the insolvency of numerous financial institutions and banks in the US,
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