Analysis of the Impact of Oil Prices on the Global Economy Essay

1. creationThe legal injury of cover becomes the bone of contention recently. Oil set seems to be hitting new highs with the regularity of a metronome. It is a bad newsworthiness for customers who wipe out to pay more on it. More frightening still, this view may get worse before it come back to normal. No one backside exactly predict when the pendulum provide soon sweep up back again since all uncertain factors existing. From the supply side of view, the OPEC is the of import heightenr, being prepared to add or subtract production to fit take. Moreover, Russia is another major producer of crude inunct in the world. They usually produce more when demand more and subtract when demand quash to cut back the outlay of oil. Anyway, speculator is another factor we pass on to consider in short run. From demand side of view, every country is trying to reduce the consumption on petroleum, the government use tax strategy to operate the oil price. Further more, government s trategic oil reserves have to be considered as a factor which causes oil supply shortage. Next, lets discuss in detail how the demand and supply congenator affect the price of oil. 2. Microeconomic Analysis2.1 Analysis of Market counterfeit in that respect are not so many oil producers in the world the countries that produce most of the worlds oil have formed a cartel, which called Organization of Petrolum Exporting Countries (OPEC). Those countries controlled about three-quarters of the worlds oil reserve. Within the OPEC countries, they tries to raise the price of its product through step-down in quantity produced and OPEC tries to set production levels for each of the member countries. From this brain of view, oil market belongs to oligopoly which only a few sellers offer same or identical products. In this form, the producers produce a quantity of widening greater than the level produced by monopoly and less than the level produced by competition. The oligopoly price is le ss than the monopoly price but greater than the competitive price. Therefore, supply and demand theory can be applied in oligopoly form of market. 2.2. add together and Demand Analysis2.2.1 Oil Supply AnalysisSupply refers to twain the ability to sell and the willingness to sell by the producer. Actually, many factors can regain the quantity and individual suppliesXinput prices, technology, expectations. The quantity supplied rises as the price rises and f... ...by tax. When the oil price goes up, the government will tax more on fuel, vice versa. Therefore, it will benefit the domestic consumers. Other factor is the Iraq influence, political unrest can leave the world without enough oil to go round. 3. ConclusionThere are too many uncertainties existing in the world oil price. According to the analysis, the price may keep going up collectable to the shortage of supplies and increasing of demand without considering the speculators factor in short-run. In long-run, the oil price will definitely go down. On the other hand, the price may be peaked already. This will result of the speculators unloading their oil inventories, causing prices to fall sharply. Reference1.http//blondesense.blogspot.com/2005/04/crude-futures-crudely-exploited.html2.kjhj3.A titanic struggle among supply and demand, http//www.occupationwatch.org/analysis/archives/2005/04/a_titanic_strug.html (visited on 29th, April)4.Oil and the Economy, http//www.federalreserve.gov/boarddocs/speeches/2004/20041021/default.htm 5.Time for OPEC to go away up its cushion, http//www.economist.com/agenda/displayStory.cfm?story_id=3759213