Paper Topic:

Oil Industry

Oil Price Rise

A Literature Review of the Causes

Student 's Name

Department

Professor 's Name

Date

Oil Price Rise

A Literature Review of the Causes

Introduction

In the 20th century , world started integrating on economic ground . The century saw one of the fastest growths in the history of mankind . Terms like World Economy started making headline . Most of the nations especially from the western world made full use of this revolution by harnessing their resources with advance machines and equipments Transportation got a boost with

the advent of railways and airplanes The world is The main reason behind this economic ride and development has been nothing but using fuels as a source of energy . The world moved itself from using wood to coal and finally to oil or better to say petroleum It is this petroleum over which this industrial revolution bloomed . With very few nations producing oil but being required by the whole world Oil has been one the most sought after commodity with oil producing countries having their coffer flushing with dollars . Changes in oil prices have caused great impact on the performance of the world economy It has its association with almost each and every period of recession and inflation (Barrell , 2004 ,

. 2 . Oil shocks of 1974 and 1979 brought an economic slowdown with it . But since 1980 , its price remained steady till 2003 when prices started increasing and is currently hovering around 55 - 58 per barrel . The condition is so precarious that it can cause a new oil shock . A 4 percent fall in global shortfall in daily supply could result in 177 percent rise in oil prices i .e , the prices will have a dramatic rise from 58 to 177 (National Commission on Energy Policy [NCEP] , 2005 ,

. 2

Literature Review

Delving deep into the issue of price rise , a number of causes came into focus . The list of reasons starts with restrained production policy of OPEC nations . Organization of Petroleum Exporting Countries or OPEC nations has reversed the upward trend of oil production since 1999 (International Monetary Fund [IMF] , 2000 ,

. 4 . Before that rate of increase in oil production was kept at the pace in accordance with the rise in demand . But the Asian crisis of 1997 made further dent in oil prices which got diminished to 11 per barrel . This fall compelled all oil exporting countries irrespective of being a part of OPEC or not to reduce production so that further decline in oil prices is avoided (IMF 2000 ,

. 4 . This decision started causing effect from late 1999 with oil prices got doubled by the end of the year while the production was forced to fell below consumption causing a deficit . Global reliance on OPEC nations for petroleum is also very important in this scenario Around two-thirds of global oil reserves are concentrated in Middle East members of OPEC . Relatively new and outside Middle East resources are small and are very expensive to develop (Organization for Economic Cooperation and...

11 pages

56.5 KB

Free sing-up