Dynamic OPEC has faced in the global market in the last 10 years

Document Type:Essay

Subject Area:Economics

Document 1

The countries that have this precious commodity boast a precious commodity that is desirable and appealing to many. This essay will investigate the various fluctuations both positive and negative that have occurred in the OPEC global market in the last decade. The essay will narrow down to the last 10 years because it is during this time that the petroleum industry has been able to realize major turns and tides making it adopt the shape it has today. Key words: OPEC, non-OPEC, Turbulent, At the early stages of the last decade as from 2001-2002, the oil market was faced with the closure of New York Mercantile Exchange which contributed to material impact especially in the prices. Nymex closed and reopened after one week, this saw prices shoot abruptly as the attack was made to cause prices to go up. It was due to terrorism attack with Iraq that all this happened. There was fear and tension that military action would follow against the terrorists in Iraq and therefore oil supply was affected. In 2001 OPEC held a meeting to stop oil prices from increasing and after this meeting everything nearly returned to normal, (Colgan, 2014). In 2004 there were notable changes in the market whereby prices shifted abruptly to lowered prices which caught the oil market as a surprise, this sent a signal that the oil market had been over supplied because the magnitude and the speed at which the crude oil prices went down was highly alarming. This was due to the fast-changing geopolitical tensions and the very basic fundamentals in the market.

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It is also worth noting as a result of industrialization some countries changed their main line economic activities to specialize in industrialization due to the great potential identified in the oil market. For instance Taiwan, South Korea, Singapore and Hong Kong, (Chen, 2016), are good example of that swiftly grew specializing in industrialization. Some of the challenges that meet countries on their way to economic development are aspects such as; the desire for price equalization on all fronts and also the ability to understand the dynamism in the market. Chen, 2016). The highly conspicuous growth in demand in 2004 rapidly dropped in 2005 through 2006, analysis shows that this happened in spite of catastrophic positive progress in the global economy. Additionally it intended to invest in proactive measures that will keep them at bay in responding to crisis or through anticipating crisis before they happen and coming up with ways to overcome them, (Kilian & Murphy, 2014).

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The oil market had been enjoying some boom until 2008 when it collapsed after it was adversely hit by political, economic, and social impacts of turbulent price fluctuations. It is worth noting that price swings has the effect of interfering with both producers and consumers appetite for investment, and economic growth. The oil industry experienced recurring cycles which were as a result of flows in the financials this gives the interested parties to the market to view the market speculatively with uncertainty. Kilian & Murphy, 2014) these speculations have been in play when setting prices in this market, other variables that have been considered are; balance in supply and demand, inventory levels and the available spare capacities for the commodity. In a nutshell the oil market should embrace total quality management which advocates for continuous improvement whenever a better strategy is detected and a faulty or ineffective one realized.

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This market has undergone a lot of fluctuations and dynamisms which need to be addressed once and for all if the market is yet to attain the best levels of efficiency and effectiveness. The oil market is one of the most sensitive markets and any single actions influences the entire market. The key players/ the industry leaders should play a pivotal role in leading the market to the right direction. In the entire essay the most conspicuous aspect is the fact that the key dynamics that influence this market revolve around the price which forms or contributes to the bottom line in the entire industry.  Journal of Applied Econometrics, 29(3), 454-478. Kilian, L. Murphy, D. P. Why agnostic sign restrictions are not enough: understanding the dynamics of oil market VAR models. Tveteras, S.

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Fair enough? Food security and the international trade of seafood.  World Development, 67, 151- 160.

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