Changes in the Price of Oil in Relation to its Effects on the Worlds Economy essays

Changes in the Price of Oil in Relation to its Effects on the Worlds Economy essays It is a fact that oil, apart from the meaning of fuel or energy, has also the meaning of power, especially for the countries that produce it or have control over its production, and the rise or fall of its price creates economic disturbances and worries all over the world. Inflation, interest rates, exchange rates, are some of the factors that depend on the price of oil and are more addicted to its changes. So, it is not a surprise, that all the powerful countries like Russia and USA, are trying continuously during the last years to increase their share of the energy pie, especially now that the situation of international economy and the low levels of oil fields, are creating an unstable environment. According to Sloman (1997 : p.p. 124-127), OPEC is probably one of the best known cartels. It is a formal collusive agreement that has one purpose, to maximize industrys profits. The interdependence of those countries makes them to collude with each other and make them act as a monopoly. Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years. Over the last year, the price of oil had increased worldwide, approximately over 100%, reaching its highest levels over the last decade. This situation had stopped last November and at that time everyone believed that recession was over. It is worthing to note that by the end of January 2001, the price of oil had been stabilized in low levels. However, at the beginning of February, the price started to increase rapidly and could be estimated around $25.00 per barrel. The same month, O.P.E.C. decided that it was necessary for the oil production to stabilize at that level without any intervention. The first days of March 2001, the price continued to increase and it was then when O.P.E.C. after a careful consideration of the unpleasant situation that had been created, decid...