Fluctuating Price of Oil and How It Affects the Global Economy
Fluctuating price of oil and how it affect the global economy
Abstract:
The oil prices have started rising significantly since the initiation of the twenty first century.
Theoretically, one can judge the impact of an oil price shock. The immediate effect of the oil price shock is the increased cost of production due to increased fuel cost. This creates an inflationary effect (mainly cost push inflation which is accompanied by a situation of unemployment). Whenever there is an overall inflation in the economy, the cost of production would also rise causing a decrease in supply. On the other hand, inflation implies a fall in the purchasing power of people. In short, oil price fluctuation has adverse effects on the economy.
The paper seeks to find out the causes of oil price hike in recent times and its impact on the economy of some selected countries. It has been found out that although oil price hike adversely affects a large number of economies, it does not necessarily affect all the countries in the same way. Introduction:
The oil, specially the fuel is an indispensable commodity for each and every country in this age of civilization. Without the fuel the pace of the development of any country will be hampered drastically. The world history has witnessed how the oil price shock in the global market has created inconvenience for all of the countries more than once since the emergence of OPEC (Oil and Petroleum Exporting Countries) Union. In recent time, the world is experiencing severe fluctuation in the prices of oil. The price of oi l showed huge increase since the beginning of the twenty first century. But the prices of oil reached all time high in the current year. The prices are
found to break every record in the last year reaching above $140 per barrel. (Econbrowser, 2008;
Jones, Donald Leiby, and Paik, 2004)
The oil prices have started rising significantly particularly since 2002. In the early days of 2002 the global
Abstract:
The oil prices have started rising significantly since the initiation of the twenty first century.
Theoretically, one can judge the impact of an oil price shock. The immediate effect of the oil price shock is the increased cost of production due to increased fuel cost. This creates an inflationary effect (mainly cost push inflation which is accompanied by a situation of unemployment). Whenever there is an overall inflation in the economy, the cost of production would also rise causing a decrease in supply. On the other hand, inflation implies a fall in the purchasing power of people. In short, oil price fluctuation has adverse effects on the economy.
The paper seeks to find out the causes of oil price hike in recent times and its impact on the economy of some selected countries. It has been found out that although oil price hike adversely affects a large number of economies, it does not necessarily affect all the countries in the same way. Introduction:
The oil, specially the fuel is an indispensable commodity for each and every country in this age of civilization. Without the fuel the pace of the development of any country will be hampered drastically. The world history has witnessed how the oil price shock in the global market has created inconvenience for all of the countries more than once since the emergence of OPEC (Oil and Petroleum Exporting Countries) Union. In recent time, the world is experiencing severe fluctuation in the prices of oil. The price of oi l showed huge increase since the beginning of the twenty first century. But the prices of oil reached all time high in the current year. The prices are
found to break every record in the last year reaching above $140 per barrel. (Econbrowser, 2008;
Jones, Donald Leiby, and Paik, 2004)
The oil prices have started rising significantly particularly since 2002. In the early days of 2002 the global
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