Oil Price Causes

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World oil prices have fallen from time to time since 1970 which has sparked interest in understanding the causes and consequences. The price of oil has fallen so tremendously during certain eras that it impaired the world economic growth therefore cause many countries to be thrown into recession and high unemployment rates. This research essay is based on three major questions: • Identify the previous episodes • Compare and contrast the identified periods • What are the causes and consequences of the sharp drop These would present the implications of oil price drop, magnitude and the drivers as followed below:

The Arab Embargo: 1973
It firstly started with the Yom Kipper War, which led an
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This signified as a drop and it reflected on the World oil price market that alerted countries to tighten energy product supplies due to slow oil production. It was stated that the Iranian revolution was the closest cause of the highest price in post – WWII history. However, it could be argued that the revolution’s impact on prices would be temporary and it boosts Iranian oil production after the revolution to four million barrels per day. At the same time Organization of Petroleum Exporting Countries was trimming output as well as the companies and governments started to build reserves. With the combination of those actions causes an upward surge on oil prices which escalated from $14 per barrel of the beginning of 1979 to more than $35 per barrel in 1981. The reasons for that influxes of prices could be the result of the revolution and the war between the Iraq- Iran which caused crude oil prices to triple. The higher oil prices depressed countries for example the United States whose petroleum consumption was reduced and the energy conservation and fuel switching was encouraged. This movement had a huge influence on U. S petroleum demand from 1978 to 1983 fell from 18.8 to 15.2 million barrels per day which was the lowest level since 1971. Those prices did not drop until 1983 when the economy…show more content…
Must be remember the 1973 Arab Embargo which created shortfalls as similar to 1979. The price of a crude oil in August 1990 cost $16 per barrel to $28 per barrel then climbed to $36 per barrel in September. To combat the ongoing crisis, Non OPEC countries supplemented OPEC production increases to off-set the 7 percent shortfall in world supplies. These initiatives were supported by conducting refinery upgrades so that crude oil be converted into light petroleum products and improvements in energy efficiency. Despites the solutions to the ongoing problems, the oil price spiked due to uncertainties although it was short lived as Saudi Arabia and Iran released oil stocks to gain revenue during the war thus calming the oil markets at the same

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