oil

Are falling oil prices good for the economy?

Are falling oil prices good for the economy?

In recent months, we have seen a dramatic drop in oil prices. For many consumers and business this fall in the price of oil will be welcome reduction in the cost of living and a reduction in the cost of business. However, is such a steep fall in oil prices good for the economy? Benefits of falling oil prices In normal economic circumstances, a fall in the oil price can help the economy. Lower oil prices reduce cost of transport and…

Impact of falling oil prices

Impact of falling oil prices

In recent months the price of crude oil has fallen 50%. This fall in the price of oil has a significant impact in reducing transport and other business costs. Falling oil prices is good news for oil importers, such as Western Europe, China, India and Japan; however, it is bad news for oil exporters, such as Venezuela, Kuwait, Iraq and Nigeria. Impact on oil consumers Lower oil prices help to reduce the cost of living. Oil related transport costs will directly fall, leading…

Russian economic crisis

Russian economic crisis

With economic sanctions and a plummeting price of oil, the Russian economy is seeing a real economic crisis. The value of the rouble is falling – causing inflation and a decline in living standards. Government tax revenues are falling as oil tax revenues decline. On top of a falling Rouble, the economy faces recession due to declining export revenues, falling real incomes, a collapse in confidence and higher interest rates. Causes of Russian economic crisis Oil dependent economy. The Russian economy has done well in recent years from high oil and…

oil-field

Dutch disease

The Dutch disease refers to the problems associated with a rapid increase in the production of raw materials causing a decline in other sectors of the economy. When the raw materials run out, the economy can be in a worse position than before. – Can discovery of substantial raw materials be a curse in disguise? If a country discovers substantial amounts of oil, gas or other natural commodity, it will begin to export…

Factors Affecting Oil Prices in Short Term and Long Term

Factors Affecting Oil Prices in Short Term and Long Term

A look at the different factors affecting the price of oil in both short term and long. Readers Question: I’m trying to update myself on what’s happening with oil prices at the moment (partly to prepare myself for uni interviews) but I’m finding very conflicting articles, such as: Article warning of oil rising to $150 at BBC Oil drops below $96 on Italian debt fears at Washington Post Oil nears $96 on Italian debt fears at NPC  Could you possibly explain to me what’s really going on? It’s an interesting question, and in…

Effect of Higher Oil Prices

Effect of Higher Oil Prices

A look into the effect of higher oil prices. Readers Question: With Oil prices rising towards $100, what are the economic effects of rising oil prices? Demand for oil is inelastic, therefore the rise in price is good news for producers because they will see an increase in their revenue. Oil importers, however, will experience increased costs of purchasing oil. Because oil is the largest traded commodity, the effects are quite significant. A rising oil price can even shift economic / political power from oil importers…

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Will the Price of Oil Fall?

Readers Question: how could oil price possibly down? any supported theory? Oil prices could fall if: Supply Increases by more than expected. For example, maybe a country like Iraq or Iran has an unexpectedly large reserve of oil that they could easily start producing. This increase in supply would cause prices to fall. Note: it is notoriously difficult to predict how much oil is available, and some do say that Iraq has a lot of untapped supply. Market Sentiment Changes Not all movements in the oil price is due to basic supply and demand,…