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Reasons for Upheavals in Oil Prices

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What Causes The Upheavals In Oil Prices In The World
Robert Bourgot
Florida Institute of Technology

The Causes of Oil Price Upheavals in the World Introduction At this stage of civilization, oil has become an essential commodity for all countries of the world. The lack of it means that the pace of development of any country will be adversely affected (Carollo, 2011). The world has, in the recent times, experienced severe fluctuations in oil prices. As at the start of twenty first century, the oil prices have shown a significant increase, but the most significant rise in oil prices started around the year 2002. As mentioned earlier, these upheavals in oil prices have adverse effects to the economy of each nation. An increase in oil price causes increased production costs which consequently lead to cost push inflation. This leads to unemployment, decrease in supply, fall in the people’s purchasing power among many others (Brabec, 2012). In order to address these issues, it is imperative that the roots of these issues are identified. This is the central focus of this paper. It identifies and explains the possible causes of oil price upheavals in the world. According to Maher (2012), causes of fluctuating oil prices in the world can be explained under demand side, supply side, economic side, and environmental protection side. This section looks at the causes of oil price upheavals from the different points of views mentioned above. The demand for crude oil has been increasing year after year. In August 2004, the International Energy Agency reported that world oil demand was increasing faster than at any other point in the past sixteen years (Carollo, 2011). The law of demand associates an increasing demand of a commodity with increasing price. In this case, as demand of oil increases, the price of crude oil increases too. Mullen &

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