Economics Assignment Global Trade and Market

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ECONOMICS ASSIGNMENT
GLOBAL TRADE AND MARKET

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Contents
Introduction................................................................................................................................3
Hypothesis..................................................................................................................................3
Justification................................................................................................................................3
Data analysis..............................................................................................................................4
Conclusion..................................................................................................................................5
Reference....................................................................................................................................6

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Introduction
Oil is one of the most important non renewable resources of the world and it decides the
global power of the world economy. There are many oil producing countries in the world that
captures the world oil market and hence enjoy the royalty. Two of them are Russia and Saudi
Arabia which supplies around 27% of the oil demand of the world. The objective of this
paper is to examine the hypothesis of whether the price of oil depends on the GDP of that
country. The data analysis will be used to test the hypothesis along with the justification of
the data analysis.
Hypothesis
The null hypothesis of the research is
Ho: GDP does not influence the price of oil set by different countries
The alternative hypothesis is
H1: GDP influence the price of oil set by different countries
Justification
Basher et al. (2018) stated that emerging economies of the world are crucial to the world
market of oil. These emerging economies shows a rise in the demand for oil from one period
to the another period. Therefore, the GDP of the countries play a huge role in pushing up the
oil prices benefitting the oil producing nations of the world. Nyangarika (2018) noted that oil
prices have macroeconomic implications for the economies that further allow the economy to
grow at a greater pace which in turn can boost the oil price. Razek et al. (2019) on the other
hand stated that, oil price is vulnerable to the changes in the economic activity of the world
economy and the individual countries due to the low elasticity of demand for oil. However,
studies have shown that the vulnerability of the oil related to the GDP of the countries have
reduced over the years due to the emergence of other resources such as solar power.
Studies also show the relationship from the other side as well. That means the GDP also
pushes the oil prices up. However, it does not work for the countries that falls under the
category of developed. GDP growth rate increases the living standard and the income level of
the customers of the market that further increases the demand for oil. Due to the forces of the