Crude Oil Price Analysis

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Economic problem to be studied
The crude oil price has been very volatile during the past several years due to the overproduction and an increasing inventory for major economies. It is very hard for the main crude oil producers to reach an agreement to cut global production all together, so the price reached a historical low level during 2015-2016 (Breul 2016), and to this day the oil price is still at a low level compared with decades ago.
Since crude oil is a very important part for many economies around the world, it would be very interesting to study how the crude oil price can affect the economic growth of Canadian industrial production, especially during the recent volatile crude oil market. Industrial production is directly related with
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The exporters are the countries that relies on the production of crude oil for economic growth, and a low oil price is harmful to them because they are now earning less income. The major oil exporters include Saudi Arabia, Russia, Iraq, United Arab Emirates and Canada (EIA 2016). Another group is the importers, who reply on the foreign oil for industrial production and can be negatively affected by an increasing oil price. The major importers are United States, Japan and China (EIA 2016). These are the countries with a large population and industries that would require a high amount of oil, and their own production has been unable to fulfill the needs. A rise in oil price would affect every aspect of economy in these countries, from people’s daily life to the cost of industrial …show more content…
In this paper, a vector auto-regression model of order p was used to model this problem. The variables that are used for fitting the model include all the following: real GDP, real effective exchange rate, real oil price, real wage, inflation, short-term and long-term interest rates. These variables are good indicators for economic growth. The findings from the paper can explain how oil price can have different impacts on the two different groups of countries, exporters and importers. And even within each group, the effects on different countries can be significantly different from each other (Jiménez-Rodríguez & Sánchez, 2004).
The research paper, Effects of oil and natural gas prices on industrial production in the Eurozone member countries, pointed out that there was significant evidence indicating a negative relationship of oil or natural gas prices and industrial production in the Eurozone area. This research paper used a panel regression model to test the hypothesis that was purposed (Bayar & Kilic, 2014).
Preliminary hypothesis to

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