RUNNING HEADER: HOW IS THE OIL PRICE FLUNCTUATION INFLUENCING THE BUSINESS WORLD
TODAY?
HOW IS THE OIL PRICE FLUNCTUATION INFLUENCING THE
BUSINESS WORLD TODAY?
Drini Ahmet
Internatonal Business
Dr. Carmen Castro, D.B.A
4/30/15
North American University
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RUNNING HEADER: HOW IS THE OIL PRICE FLUNCTUATION INFLUENCING THE BUSINESS WORLD
TODAY?
ABSTRACT:
This paper analyzes why oil prices are falling and it addresses how oil price 4uctuaton is
in4uencing the business world today. It summarizes the e6ect of declining prices in the
exportng countries, and 8nally the e6ect of oil prices in other energy-related goods and
services.
Keywords: Oil Prices, Business World, OPEC.
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RUNNING HEADER: HOW IS THE OIL PRICE FLUNCTUATION INFLUENCING THE BUSINESS WORLD
TODAY?
INTRODUCTION TO THE STUDY:
There are two key factors that have contributed to the record decrease of oil price: Signi8cant
increase of producton from countries outside OPEC, as well as lower demand from major
countries as a result of the global crisis.
What is happening to the price of oil has become the daily news on the economy. Oil is among
the few or the only product that could mislead or completely reoriented world markets and
many industries that depend on oil use. In very few weeks the price has declined by an average
price that a few weeks ago was about 118 to 120 dollars a barrel is thought to soon move to 60
dollars, a decrease of 50%. What is happening is a breakdown of the relatonship between
supply and demand. Global supply of oil is much greater than demand and this is for two
reasons. First, outside OPEC countries have managed to produce about 60% of the world’s need
for oil. Now there is no longer a body, such as OPEC, that controls the rato of quantty o6ered
on the market and prices in internatonal markets. On the other hand, the global crisis stll
contnues to have its e6ects, especially in large economies, including China, Brazil, India or
South Africa. From an economic growth of 7 to 10%, now economic growth in these countries
has gone down to 6%, this means a reduced demand for oil. Also, the US has introduced other
oil-bearing areas and today the United States manages to produce 10 million barrels a day, as
much as Saudi Arabia.
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RUNNING HEADER: HOW IS THE OIL PRICE FLUNCTUATION INFLUENCING THE BUSINESS WORLD
TODAY?
THE PROBLEM STATEMENT:
Internatonal analysts are connectng today’s wars with the price of oil, and in partcular in
Ukraine, the direct involvement of Russia, for which she also have sanctons imposed, and
already several years old fight in Syria, where Russia is funding support against Assad. Russia is
one of the main oil producing countries in OPEC (occupying third place). This shows the role of
oil export to Russia and its budget. AHer recent economic developments associated with
enormous devaluaton of the ruble alongside euro and dollar and the economic crisis, shows
the serious situaton in Russia. All this will send the country into a severe recession or spending
cuts planned and towards creaton of a high de8cit.
Russia is just one example to illustrate the e6ect that oil price 4uctuatons are having in the
economic development of a country.
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RUNNING HEADER: HOW IS THE OIL PRICE FLUNCTUATION INFLUENCING THE BUSINESS WORLD
TODAY?
THE PURPOSE OF THE STUDY:
How is the oil price 4uctuaton in4uencing the business world today?
In economics, 8rst lesson students learn is the relatons between supply and demand. And, they
realize that the increase in supply when demand remains unchanged a6ects any price decline.
Oil prices are falling everywhere today precisely because of such relatons in internatonal
markets.
In general, there are two main factors that have influenced the fall of oil prices during 2014 and
is expected to contnue the following year.
The 8rst factor relates to disagreements within OPEC, more precisely the insistence of Saudi and
