Relationship between oil prices and several indicators, Macroeconomics

Assignment Help:

"The price of Brent crude oil has hit $111 a barrel and US crude also rose in price, as worries persist about the unrest in Libya". (BBC News, 2011) This quote, from the BBC news website is indicative of global concern when oil prices rise to certain levels. From this, mass panic ensues. Forecasters release downbeat statements on the UK's economic future, on business profits, and on other macroeconomic indicators. Furthermore the UK general public worry immensely about their personal future, specifically their employment, and their ability to make mortgage payments, heat their home or feed their family. Oil is used in astronomical proportions in the UK, 1611 barrels each day (Rogers, S. Guardian, 2010). However statistics from the US Energy Information Administration show that the production of oil in the UK has decreased by such an amount and has reached such a level that, in 2004, the UK switched from being a net exporter of Oil, to being a net importer.

One would expect this to have drastic effects on the macroeconomic indicators. The main usage of Brent crude is for motor fuel, although it has been used to heat homes and is also widely used in the manufacturing industry. This trend has changed over the past 30 years, as now the majority of houses do not require oil for heating. The same cannot be said for the main usage. As yet, whilst car manufacturers face increasing pressure to create a substitute for oil powered cars, they have only been mildly successful and oil suppliers do not yet consider the emergence of electric cars as a serious threat to the demand for oil (Bergin, Reuters, 2012). The fashion for electric cars and renewable energy sources has led to an increase in electric cars, but not nearly significant enough to reduce the UK's need for oil. Consequently when oil prices rise in the future, the same trend of doom and gloom will continue to engulf the United Kingdom (UK).

Another major problem associated with this topic is that, due to the Arab spring and the political unrest in major oil producing economies across the world, oil prices may keep on rising to previously unseen levels. This uprising doesn't show any sign of relenting which would suggest that volatility of the price of oil will remain high for the foreseeable future. Therefore from observing the relationship between the indicators, a more accurate understanding of the relationship that oil prices have with the macroeconomy can be gained. This is useful as it will indicate whether there is cause for such worry and panic when oil prices are subject to a shock.


Related Discussions:- Relationship between oil prices and several indicators

Unemployment classification, Unemployment classification Economists som...

Unemployment classification Economists sometimes differentiate between different types of unemployment. There are many type of ways of classifying unemployment however the foll

Equilibrium price of guitars, Suppose the demand for guitars in State Colle...

Suppose the demand for guitars in State College is given by Qd = 9000 - 12P where Qd is the quantity demanded, and P is the price of guitars. Also, suppose the supply of guitars is

Calculate asset turnover, The following information has been extracted from...

The following information has been extracted from the recently published accounts of Noddy Plc:                           Balance sheet as at 31 st May

Show the adjustment process to new equilibrium using graph, Consider the mu...

Consider the multiplier model we have studied in class. Assume that the economy is initially in equilibrium and that real income is $180. The marginal propensity to expend is 0.66.

Monetary policy , Under what conditions does the text explain that monetary...

Under what conditions does the text explain that monetary policy is neutral? If it is neutral under these conditions, why is it still an important economic policy tool? Your answer

Debt , What is debt swept?

What is debt swept?

What is money and what is not money, What is money and what is not money ...

What is money and what is not money If you are trying to conclude if something is money, simply consider whether it would be accepted in most stores as payment. You then realiz

Online homework, I sent to you an email for the online homework the deadlin...

I sent to you an email for the online homework the deadline through 10 hours all questions are about 10 please do it in full score

What is treasury bills, What is Treasury bills In most countries you wi...

What is Treasury bills In most countries you will find many types of government bonds. An important distinction is the duration of the bond, that is, the difference between the

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd