The paper "The Reason of Changing Price and Supply: Oil Market" is a perfect example of an assignment on macro and microeconomics. Oil markets have become increasingly volatile, thus causing a great concern in the world economy in recent times. Fluctuation in oil price has an immediate cascading effect on all other spheres of economy. Oil is undoubtedly the most powerful currency in the modern world for the dynamics of oil markets not only affect commerce, but have far-reaching and extremely significant consequences in international politics. On April 21, 2008, the price of New York crude reached a record high of $118.05 per barrel.
The reasons attributed to this unprecedented rise are unrest in Nigeria, weakness of the dollar and the reluctance of OPEC to increase short-term output. 1 It took merely one more day for the oil price to climb a steeper high at $119.37 per barrel in New York on April 23, 2008. Danny Fortson mentions in his report published in ‘ The Independent’ that this increase signals gloom for the world economy. With this increase, the price has now risen five-fold than it was at its lowest in the last five years.
Such a phenomenal rise in the price of oil has led politicians and economists all over the world to speculate that the global economy might soon hit an all-time low with the unstoppable rise in the price of oil as seen off late. The head of the International Energy Agency, Nobuo Tanaka warned that the soaring price of oil may be what tips the global economy into recession. Slowing economies in Western Europe and America are already an indication of the far-reaching effects of a steep rise in oil prices. 2 The mechanism of control of oil prices is an economically and politically complex task.
Oil prices over the world are controlled by The Organization of petroleum exporting countries (OPEC). Formed in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, OPEC today has expanded to eleven member countries that also include Qatar, Indonesia, Socialist Peoples Libyan Arab Jamahiriya, United Arab Emirates (UAE), Algeria, Nigeria, Ecuador, and Angola.
1. ‘Oil price shoots past $118 for first time’, AFP, Times of Oman, April 22, 2008, viewed on April 23, 2008, URL: http://timesofoman.com/inner_cat.asp?cat=4&detail=16145&rand=usSZNm3gHL0A26duPc80rWEYKQ
2. Fortson, Danny, April 23, 2008, The Independent, ‘Surge in oil prices prompts warnings of global recession’, viewed on April 23, 2008, URL: http://www.independent.co.uk/news/business/news/surge-in-oil-prices-prompts-warnings-of-global-.htmlssion-814116.html
3. The Organization of the Petroleum Exporting Countries (OPEC), Brief History, OPEC official site, viewed on April 23, 2008, URL: http://www.opec.org/aboutus/history/history.htm
4. Dr. Steve Sjuggerud ‘History of Oil’, The Investment U E-Letter: Issue 360
Wednesday, August 11, 2004, viewed on April 23, 2008, URL: http://www.investmentu.com/IUEL/2004/20040811.html
5. Williams, James, History and Analysis, WRTG Economics, viewed on April 23, 2008, URL: http://www.wtrg.com/prices.htm
6. ‘Economics Basics: Demand and Supply’, Investopedia, viewed on April 23, 2008 URL: http://www.investopedia.com/university/economics/economics3.asp
7. Williams, James, History and Analysis, WRTG Economics, viewed on April 23, 2008, URL: http://www.wtrg.com/prices.htm
8. ‘Trends in FX-What Happens to Currencies If Oil Goes to $60?’ FXCM- Forex Capital Markets, viewed on April 24, 2008, URL: http://www.fxcm.com/if-oil-goes-to-60.jsp
9. Lien, Kathy, ‘Commodity Prices And Currency Movements’, Ivestopedia, viewed on April 24, 2008, URL: http://www.investopedia.com/articles/forex/06/CommodityCurrencies.asp
10. ‘OPEC- Oil Cartel in Profile’ 18 October 2007, BBC News, viewed on April 24, 2008, URL: http://news.bbc.co.uk/1/hi/business/3768971.stm
11. McKillop, Andrew, ‘What Happened to Oil Price Elasticity?’, April 25, 2006, Financial Sense Editorials, viewed on April 23, 2008, URL: http://www.financialsense.com/editorials/mckillop/2006/0425.html
12. Hwang, M.J, Yang, C.W, ‘Unstable Price Elasticity and High World Oil Prices’ viewed on April 24, 2008, URL: http://www.iaes.org/conferences/past/philadelphia_52/prelim_program/d00-1/hwang-yang.htm
13. Lynne Kiesling, 2005, ‘Summary of reasons why oil and gasoline prices are currently so high’, Knowledge Problem, viewed on April 24, 2008, URL: http://www.knowledgeproblem.com/archives/001385.html
14. ‘Low investment level to keep oil prices rising’, Reuters, published on the World Wide Web on November 8, 2006, Business Day, viewed on April 24, 2008, URL: http://www.businessday.co.za/articles/world.aspx?ID=BD4A312789