Oil Markets Essay Example | Topics and Well Written Essays - 1500 words

Oil Markets - Essay Example This essay looks at the historical of price changes in the oil industry and the influence of market fundamentals. James Smith shares a perspective of trends in the oil prices and takes back to the spell between 1874 and 1974. He argues that during this time the prices of oil were characterized by a stable market (Smith, 2009). During the time, a barrel of oil ranged between $10-$20 (Smith, 2009). This period can be explained to have had a stable supply of crude oil that was accessible even to the remotest nations of the world. Therefore, given the market was with no movement, the price elasticity of demand was insignificant and thus the stable prices. After the ‘golden era,’ the world has experienced insurmountable boom and burst in the economies. The world achieved tremendous progress in the early 18th Century. During this time, the prices of crude oil were relatively low given that the supply was steady. However, the price of oil have increased since and resulted in the worst crisis in the world. The world experienced the great depression in mid-18th century. This was a result of decreased production of crude oil as a result of the war in the Middle East. And given that price elasticity of demand a minimum reduction in supply lead to an increased rise in the price of oil. The 1970s saw the price range between $12 to and $ 53 per barrel and shoot to $ 75 per barrel in 1981 (Smith, 2009). In the subsequent years, the prices continued to drop until it lowest at $12 per barrel in December 2008. However, in July the same year the price has risen to $ 145 (Smith, 2009). At the end of the same year had the price at $40 for a barrel (Smith, 2009). Smith cites a number of economic circumstances behind the trend in prices. There are a large number of factors that prompt changes in the global market for crude oil. The 20th century has witnessed increased and declined consumption of oil at the same time. James Hamilton