Oil prices and its effect on the global market Term Paper

crude hurts and its effect on the global market - Term Paper ExampleThe developing countries are intemperately dependent on crude oil exporting countries for their import of petroleum convergences. So if there is a fount in oil prices only the oil exporting countries benefit while bringing a devastating effect on the developing nations. What really affects the oil prices is the quest and supply of oil which we are expiration to look into detail later. The global market saw a recent surge in oil prices since the last two social classs with the virtually recent rate of today being $124 per barrel (forex.com). It was predicted that the take of crude oil must be increased by the oil producing countries to bring the prices down. The Arab oil exporters held a meeting in early 2011 in Cairo to discuss this issue but refused to increase oil production as they believe that the supply is sufficient in the market. The oil prices rose to $ 94.74 per barrel this year since October 200 8 when oil prices were record breaking high. The forecasted trend is an increase in oil prices in the coming weeks abject up to $ 100 a barrel. After the financial crisis of 2008, OPEC or Oil Producing and Exporting Countries decreased their direct of output in order to deliberately create a shortage so that prices go up. In 2010, the take in for oil increased and is expected to increase more than in 2011. OPEC must release many of their stock and raise the supply of oil or else the prices can rise to unprecedented level of $ cl per barrel. These unfavorable conditions can lead the world into another crisis. Body The trading of oil is one of the most significant trading done in the world. Crude oil is a primary ingredient in many energy manufacturing and services industries. I certainly believe that oil should not be do by on the commodity exchange because it can have significant impact on the world economy. So if there is a fluctuation in oil prices it affects oil producers a nd exporters both. The market price for any product is determined by the demand and supply of it in the market. The desire to want something is defined as demand or when you realize that you want a product, can afford it, and have made a decisive plan to buy it. The law of demand means that other things be the same, the higher the price of the good, the smaller is the quantity demanded The higher price of any product will reduce the quantity demanded for two reasons. A notable economist, Kotler has found that one of the reason is the substitution effect, that is, when the price of a product rises, other things remaining the same, its prospect cost rises. Although each good is unique but has its substitutes, for example the substitute of oil in an energy producing plant could be water or solar energy to produce electricity. As the opportunity cost of a product rises, people have a tendency to buy less of that and more of its substitute. Another reason for change in quantity deman ded is the income effect. When a price changes and all other influences on buying plans remaining the same, the price rises relative to peoples incomes. So faces with a higher price and an unchanged income, people cannot afford all the things they previously bought. Subsequently, the demanded quantity reduces. Price has an inverse relationship with demand (Kotler, 2006). A supply is more than just having the resources and the technology to produce something but the