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Crude Oil - Assignment PDF

   

Added on  2021-06-14

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Crude Oil 1CRUDE OIL PRICE FLUCTUATIONS BETWEEN 1998-2018by (Name)The Name of the Class (Course)Professor (Tutor)The Name of the School (University)The City and State where it is locatedThe Date

Crude Oil 2Crude Oil Price Fluctuations between 1998-2018Crude is an important natural resource that keeps the world economy running. Today, theresource is recognized as the engine of every economy of the world. Basically, crude oil is anenergy source that is integral to the production processes in various industries. Therefore,stability in the supply and prices of the natural resource is most desirable because anyfluctuations in the price of crude oil affect the prices of all other goods and services within thecountry (Oil’s Wild Ride, n.d.). However, over the last two decades, the prices of the commodityhave fluctuated significantly in all economies of the world (Crude Oil Prices, 2018). For thisreason, this study seeks to conduct an economic analysis of the market of crude oil. Additionally,the paper will discuss the various welfare implications that arise due to changes in the prices ofcrude oil within the economy. History of crude oil price fluctuationsAs noted earlier, the prices of crude oil are very volatile and have been subject tofluctuations over the past 10 years a as shown in the graph below.

Crude Oil 3Source: (Trading Economics, 2018).In the period between 1998 and 2018, the price of crude oil globally has been risingsignificantly with slight drops occasionally. For purposes of this assignment, the nominal pricesof crude oil shall be utilized. In 1998, the price of crude oil was $11.91. In the year that followed,the price rose by $4.65 to a price of $16.56. The trend continued in the following year, as theprice of oil rose sharply in 2000 to $27.39 (Trading economics, 2018). The year of 2001,experienced a slight drop in the price of the commodity and was recorded at $23.0. The decreasein price continued in the following year as the price of oil in the country was recorded at 22.81(Crude Oil Prices, 2018). Unfortunately in 2003, the process picked up again and rose by asignificantly large amount to $27.69. Afterwards, in the years that followed, the prices of oil rosesignificantly. For instance, in 2004, the price of oil was recorded at 37.66 (Trading economics,2018). In the following years, the prices changed from $50.04 to $58.30 and then 64.20 in 2005,2006 and 2007 respectively. In 2008, the price rose sharply to $91.48 before decreasing sharplyto 53.48 dollars in 2009 (McMahon, 2017).. In the year that followed, the prices picked up againand was recorded at $71.21 in 2010. Between 2011 and 2014, the oil prices were recorded at$71.21, $87, $86.46, $91.17 and $85.60 consecutively. In 2015, there was a significant drop inthe prices of oil and was recorded at $41.85. Likewise, the prices dropped in 2016 to $36.34before rising to $42.74 in 2017. Currently the average price of crude is at $67.70 (TradigEconomics, 2018).Reasons why the prices have fluctuated in the last 20 years

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