The Interaction Between Crude Oil And China 's Gdp

The United States consumes more than 25% of the world’s petroleum products which is a large percentage, considering only 3% of the world’s oil reserves are produced by the United States. Given the demand for petroleum products such as gasoline, understanding why Crude oil prices have skyrocketed in recent years, is not hard. According to the article “Ending America’s Oil Addiction,” the surge in crude oil prices can be reduced in large part to the simple concepts of supply and demand. (Cooper, 2008)

For example, the Intercontinental Exchange while oil prices have not been decided on by oil producers such as Niami refinery fires, Nigerian Pirates and global oil markets. The laws of demand and supply are also predicted by the increase and decrease in the prices of oil. Oil prices are driven by the increase in demand for oil which has limited or completely destroyed the gains for suppliers and producers. While the U.S still consumes more oil than any other country, it is evident from the increase in oil demand that developing countries such as China, India and Japan are driving oil prices higher by their continous growth in oil demand (Anderson, 1).

A rise in oil prices impacts Lesser Developed Countries (LDCs) negatively. Not all countries in the world are as developed as the United States, Britain, and Japan. Many countries only recently have begun modernizing. A huge factor in the rate of modernization is the price

Comparing this to the world oil price in that same time period, there seems to be an overall positive relationship between oil price and imports and exports. The price rises about $50/barrel over three years until a sudden spike in 2007-2008, then drops dramatically before sharply rising again (Figure 2). The drop in total imports and exports in 2012 does not seem to be correlated with price, since there is an upward trend in price from 2009-2013. Aside from that year, it appears that there is an overall positive correlation between total imports and exports of oil and the price of oil, suggesting that because oil is an essential commodity, demand is much more inelastic than supply. Thus, imports rise when prices are high even though it is disadvantageous for importers because exporters are willing to provide a larger quantity and importers are less sensitive to price.

Shale revolution started about ten years ago due to technological developments such horizontal drilling and hydraulic fracturing. The increasing exploitation of shale oil significantly affected the oil market. In this report, WTI oil price was predicted over the next five years using historical data. A discussion of major factors that historically affected oil prices is presented. Historical events were linked to current and expected future events to evaluate the predicted prices. To further evaluate the forecasted prices, they were compared to the predicted prices by the Economy Forecast Agency.

Unlike Brent, North American crude production is up amid a "shale oil revolution." To capture this fact, we use two variables published by the EIA. The first, CANADA, is the weekly amount of Canadian crude imported into the Petroleum Administration for Defense's Midwestern District ("PADD 2") where Cushing is located. The second, RIGS, is a monthly count of rotary rigs operating onand off-shore in the 50 United States. Both series increase steadily over most of our sample period, accelerating sharply from 2009 (RIGS) or 2011 (CANADA). Both variables should be inversely related to the spread: ceteris paribus, more North American supply should push down WTI's price—especially if the oil faces difficulties reaching international markets.

Oil and gasoline prices follow a trend that sparks mixed reactions from different industry stakeholders in the America’s economy. The trends on oil and gasoline and their stability have immense impact on the performance of the economy based on their primary as energy. The government’s ability to ensure stability in price movement is seen as a key step towards fostering steady economic growth. A variety of factors are at play in the determination of these trends exhibited by the oil prices in America. Some of these factors are attributable to the market forces and understanding them would be instrumental in resolving economic problems resulting

Recently, we found that “the oil price dropped a lot; one year ago, a barrel of Brent crude cost $110 and today it was merely $60, which resulted in 45% decrease in the oil price through economies. Not only did the oil price cut, the price of goods and services also dropped in the worldwide economy. When the price of goods and services declined, consumers would like to consume more and purchase more products, because they could pay less to get the same thing as before. And for firms, cheaper inputs lowered the cost of manufacturing goods, which resulted in the increase in the overall profit. What’s more, we all know that energy use (oil) is

In addition to the decline of the Chinese economy, demand for oil is also affected by environmental concerns because burning oil creates carbon dioxide, a greenhouse gas that is contributing to global warming. In recent years there has been a growing emphasis on reducing carbon emissions in order to become more environmentally friendly. Businesses, countries, and consumers are encouraged to pollute less and leave a smaller carbon footprint. For example, China, the world’s largest consumer of oil, now holds the most wind turbines which shows a push to become less reliant on oil and more environmentally friendly. This is especially evident after the recent United Nations Conference on Climate Change, or COP 21, which was held in Paris last December. At this conference world leaders agreed to combat global warming by trying to reduce greenhouse gas emissions and aiming to become carbon neutral by the second half of the century. This will certainly negatively affect the demand for oil not just in the present, but for years to come as the world tries to shift from a strong oil reliance to alternative fuels. Although the world may be in search for of alternative fuel sources, cheap oil hinders this search because it lowers its incentives. The

However, recently, china’s economy has experienced a significant slowdown due to the shift in growth of the nation to rely more on private enterprise and domestic consumption. This shift in economy reduces its demand for industrial raw materials for manufacturing, which translates to a decrease in demand of oil for use in production plants. A survey of China 's industrial heartland identified decreases in key areas of new orders, export orders and output prices (Letts 2015). Furthermore, being the world’s second largest consumer of oil, this move that China makes will have

Changes in supply and demand played a major role but the effect was not very harmful. However, it is suggested that supply factors give bigger impact than demand factors to the latest oil price collapse. If driven largely by supply factors, historical estimates suggest that the 45 percent of the oil price collapse would likely lift global GDP by up to 0.7 to 0.8 percent over the medium term and reduce global inflation by a full percentage point in the short term (Baffes, Kose, Ohnsorge,

Price is depended on supply and demand. There are two different laws: The Law of Demand and the Law of Supply. The Law of Demand is a relationship, which involves price and quantity. It states that as the price of a product goes up (oil goes up), the quantity of the product (oil) will go down; therefore, this is a strong relationship between price and quantity. The Law of Supply, however, is the direct relationship between price and the quantity in which the seller produces. So as price goes up, the quantity the seller will produce will go up because the price allows for the seller to produce more output. Demand shifts are caused by economic growths. Economic growth is an increase in the capacity of an economy to produce goods and services, from a certain

There are various empirical literatures, investigating the relationship between oil price variations and economic growth. The existence of a negative relationship between macro-economic activities and oil prices has become widely accepted especially after Hamilton’s 1983 work. He pointed out that increase in oil prices, reduced US output growth from 1948 to 1980. Hamilton's findings have been confirmed and extended by many authors and researcher. Hooker (1996) confirmed and extended Hamilton’s work for the period 1948 to 1972 and demonstrated that the oil price level and its changes do reflect the influence on GDP growth. This is shown in the third and fourth quarters after the shock that rise of 10% in oil prices lead to a GDP growth decrease of approximately 0.6 %. Accordingly, Lee et al. (1995) Mork (1989), and Hamilton (1996) presented the non-linear transformations of oil prices to re-establish the negative association between oil prices increases and economic decline, as well as these researchers also analyzed Granger causality between both variables. The result of Granger causality test proved that oil prices Granger cause U.S. economy before 1973 but no

There are various empirical literatures, investigating the relationship between oil price variations and economic growth. The existence of a negative relationship between macro-economic activities and oil prices has become widely accepted especially after Hamilton’s 1983 work. He pointed out that increase in oil prices, reduced US output growth from 1948 to 1980. Hamilton's findings have been confirmed and extended by many authors and researcher. Hooker (1996) confirmed and extended Hamilton’s work for the period 1948 to 1972 and demonstrated that the oil price level and its changes do reflect the influence on GDP growth. This is shown in the third and fourth quarters after the shock that rise of 10% in oil prices lead to a GDP growth decrease of approximately 0.6 %. Accordingly, Lee et al. (1995) Mork (1989), and Hamilton (1996) presented the non-linear transformations of oil prices to re-establish the negative association between oil prices increases and economic decline, as well as these researchers also analyzed Granger causality between both variables. The result of Granger causality test proved that oil prices Granger cause U.S. economy before 1973

Energy resources are essential for national security, technological development, overall contemporary life style, etc. In this respect, oil is the main source for worldwide economy. Peak oil would imbalance countries' economical situations and may lead to a chain reaction with negative effects on multiple layers. Evidently, there is mutual interest to prevent such a thing from happening but the possibility is nevertheless considered. OPEC's initial goal to ensure stable prices on petroleum markets in order to avoid any negative fluctuations did not always correspond. The organization actually favored inflation more than in one occasion but its influence in controlling oil prices dropped considerably since 1973. It was proven that, having quadrupled the price of oil, OPEC had in its hands the power to inflict economic hurt on the rich countries. (Beenstock 2007, p. 134) Although OPEC does not completely control the oil market today, it nevertheless continues to be influent because its decisions to reduce production may lead to either a decrease or increase of oil prices. OPEC's existence is dependent on the future of oil. Whether or not oil will dominate as the main energetic source for worldwide economy will decide its future. Considering that OPEC's oil has been a vital source of energy during the last half of century, (Khusanjanova 2011, p. 19) and that oil is expected to play a similar role within the next century, we can assume the organization will at least maintain its