Oil prices economics is the economics deals with the price of oil. Likewise the prices of other goods the price of oil experiences wide range of price oscillation in terms of shortage or oversupply. Considering to the shift in demand and OPEC and Non OPEC supply as well as the geopolitical events the, oil prices cycle expanded over years. Two Primary Factors determine the price of oil. They are: Supply & Demand and Market Sentiment. Supply and demand indicates the relationship between the quantity of a product that producers desire to sell at various prices and the quantity that consumers desire to buy from market. Market Sentiment indicates the activity and price movement of the securities traded in that market.
Price of the U.S. petroleum …show more content…
Yom Kippur War is the first political incident after 2nd world war that affects the oil prices. It created first significant jump in oil price since 2nd world war. In October 5, 1973, the Yom Kippur War started with an political attack on Israel by Syria and Egypt. The United States and western world supported Israel in political terms. This incident resultant several Arab exporting nations joined by Iran imposed an embargo on the countries supporting Israel. They also curtailed production which causes extreme shortage of crude oil and as a consequence the prices of oil increased 400 percent in a short period. On the contrary, non-OPEC production increased from 25 million barrels per day to 31 million barrels per day which made them profited in a significant level. Crises in Iran and Iraq also affect the oil market severly. During 1979 to 1980 Iranian revolution resulted a large number barrels loss per day of oil production. This event affect the oil market more than Yom Kippur War. In September 1980, Iran was invaded by Iraq as they were already weakened by the revolution. This incident reduce the combined production of oil in Iran and Iraq. It resultant 10% oil reduction in world oil market compared to the previous year. This much loss of production create huge crisis in oil market. The prices of oil jumped more than double shifting $14.95 to …show more content…
The prices of the oil was mainly controlled by USA. The failure of price control of OPEC begins from their lack of monitoring and controlling the production and spare capacity. Saudi Arabia tried to control the oil price by threatening to increase production enough to crash prices. But lack in comprehensive planning resulted failure in fulfilling the goal. For example, during 1979-80 the oil minister of Saudi Arabia tried to reduce the oil price and increase the production as the high the price reduce the demand curve in significant manner. But failure of OPEC mechanism fails the goal as well. In that period OPEC enlisted countries bear a heavy loss due to their lack of oil market mechanism. From 1982 to 1985, OPEC attempted to formulate production quotas in low number to steady the oil prices. These attempts resulted in hazardous failure as several members of OPEC produced beyond their quotas. From 1982 to 1990 USA began to control the price of oil from the shadow by maintaining the increase of oil production throughout the world. In the year of 1990, the prices of oil rose as a consequence of gulf war. But oil price remained high only for that year. Afterward, the continuous falling of oil price began again. During this time the shadow oil price control of USA made their economy and political position in a much stronger place. In the period from 1990-97, the significant increase in oil production, stability in politics
Price of the U.S. petroleum …show more content…
Yom Kippur War is the first political incident after 2nd world war that affects the oil prices. It created first significant jump in oil price since 2nd world war. In October 5, 1973, the Yom Kippur War started with an political attack on Israel by Syria and Egypt. The United States and western world supported Israel in political terms. This incident resultant several Arab exporting nations joined by Iran imposed an embargo on the countries supporting Israel. They also curtailed production which causes extreme shortage of crude oil and as a consequence the prices of oil increased 400 percent in a short period. On the contrary, non-OPEC production increased from 25 million barrels per day to 31 million barrels per day which made them profited in a significant level. Crises in Iran and Iraq also affect the oil market severly. During 1979 to 1980 Iranian revolution resulted a large number barrels loss per day of oil production. This event affect the oil market more than Yom Kippur War. In September 1980, Iran was invaded by Iraq as they were already weakened by the revolution. This incident reduce the combined production of oil in Iran and Iraq. It resultant 10% oil reduction in world oil market compared to the previous year. This much loss of production create huge crisis in oil market. The prices of oil jumped more than double shifting $14.95 to …show more content…
The prices of the oil was mainly controlled by USA. The failure of price control of OPEC begins from their lack of monitoring and controlling the production and spare capacity. Saudi Arabia tried to control the oil price by threatening to increase production enough to crash prices. But lack in comprehensive planning resulted failure in fulfilling the goal. For example, during 1979-80 the oil minister of Saudi Arabia tried to reduce the oil price and increase the production as the high the price reduce the demand curve in significant manner. But failure of OPEC mechanism fails the goal as well. In that period OPEC enlisted countries bear a heavy loss due to their lack of oil market mechanism. From 1982 to 1985, OPEC attempted to formulate production quotas in low number to steady the oil prices. These attempts resulted in hazardous failure as several members of OPEC produced beyond their quotas. From 1982 to 1990 USA began to control the price of oil from the shadow by maintaining the increase of oil production throughout the world. In the year of 1990, the prices of oil rose as a consequence of gulf war. But oil price remained high only for that year. Afterward, the continuous falling of oil price began again. During this time the shadow oil price control of USA made their economy and political position in a much stronger place. In the period from 1990-97, the significant increase in oil production, stability in politics