Oil Price Sparkling Impact on USA
Name:Ji Ting Student ID： s07645
Research paper supervisor:Dr.Seku Conde
Minzu University of China
2007-2008 Academic Year
Abstract：This paper presents the oil price fluctuations on the impact of the United States mainly, focus on analyzing the reasons for the oil price sparkling, and the U.S. oil industry, financial and economic aspects. Finally put forward some useful suggestions and the government's macro-control measures simply .
Key words: oil price; economic; Industry; impact.
1、Introduction
Oil prices, an economic scourge in decades past, have soared to record levels in recent years. The United States still accounts for nearly a quarter of the world oil market. Oil price shocks slow down the rate of growth （and may even reduce the level of output）and lead to an increase in price level and potentially an increase in the inflation rate. An oil price hike acts like a tax on consumption and, for a net oil importer like the United States, the benefits of the tax go to major oil producers rather than the U.S. government, just like the American Exxon Mobil oil Corporation
Over the past two years, oil prices have increased very sharply, with the Fund's reference price rising from a 25 year low of $11 per barrel in February 1999 to a peak of close to $35 per barrel in the first week of September 2000.[1] After easing somewhat in early October, oil prices increased again in late October and November to an average of about $32 per barrel. At the same time, futures markets indicated that average oil prices in 2001 would be about $5 per barrel higher than projected in the most recent World Economic Outlook (WEO) published in late September. We can get analysis from the below:
Since late November, oil prices have fallen back significantly, reflecting both the slowing of global economic activity-which to some degree, of course, itself reflects higher oil prices-and the impact of recent OPEC production increases, resulting in a rising level of stocks. As of December 20th, the Fund's reference price had fallen back to just over $22 per barrel, while futures markets suggest that the average price of oil in 2001 will be just under $24, only $1 higher than in the original WEO baseline. While oil prices remain highly volatile, if this decline is sustained the recent spike in oil prices would be shorter lived than assumed in the discussion below, and the resulting impact on growth and inflation would be correspondingly less severe.
Figure [2]
2、Recent Developments and Outlook in Oil Markets
In October and November, 2000 the world oil price averaged over three times higher than its February 1999 low, and, excluding the Gulf war period, reached a 15 year high in both real and nominal terms. In the mid-1990s, as the pace of economic expansion picked up so did world demand in general for energy and for oil in particular. The effect on oil prices was muted as oil production largely kept pace with the increase in oil consumption.[3] With the onset of the Asian crisis in 1997, as well as subdued activity in Japan and Europe, global consumption of oil fell significantly short of production and the Fund's indicator price for oil fell progressively from about $20 a barrel in early 1997 to below $11 in February 1999 .
In an effort to arrest the decline in the price of oil, the Organization of Petroleum Exporting Countries (OPEC) met on several occasions in 1998 and concluded agreements to restrain production.[4] The upward trend in production was reversed, but compliance with the agreements was not sufficient to prevent price declines.[5] In early 1999, however, OPEC's production restraints were reinforced by parallel agreements with some other oil exporting countries (most notably Mexico and Norway) which enabled oil production to be reduced more effectively from the second quarter of 1999 onwards. Prices progressively increased, more than doubling by the end of the year and oil production fell below oil consumption even in the summer period when stocks usually accumulate. Early this year, in an effort to moderate the price increase, OPEC policy reverted to one of periodic increases in production targets. In March, OPEC increased targeted production by 1.7 million barrels per day-equivalent to about 2 percent of world production. Following this increase, and partly in response to concerns by some OPEC members on the long term effect of high prices, including loss of market share to non-OPEC producers, OPEC informally defined a target price band of $22 to $28 a barrel and prescribed increases or decreases of one half million barrels per day, should the OPEC reference price remain outside this range for more than 20 consecutive market days.[6] Subsequently, OPEC increased its production targets by amounts in excess of one half million barrels on June 21 and September 10, and by one half million barrels on October 30.
The recent price rise is the fourth episode of sharp upward movement in the price of petroleum in the past thirty years. So far it is much smaller in terms of magnitude of the terms of trade impact than the first two episodes, but it has outpaced the third (see Annex). In terms of the magnitude of the price change, the first and second oil price shocks, in the mid and late-1970s, respectively, each entailed a more than tripling of the price of oil; and both lasted for about 5 years. By contrast, the price spike in 1990-91 lasted only about six months and even at its highest point was less than double the price in the preceding period.
3、Current Market Conditions and Near Term Outlook
The current market conditions and the near term outlook for oil reflect the interplay of production, stocks and consumption. Over the past two years global economic growth has greatly strengthened-from a rate of 2.6 percent in 1998 to 3.4 percent in 1999 and to an estimated 4.7 percent in 2000. As a result, the growth in global oil consumption increased from 0.6 percent in 1998 to 1.6 percent in 1999, before moderating somewhat this year due to the sharp oil price increase.
There are noticeable seasonal patterns in production and in primary consumption cycles of oil. Peaks for both cycles occur in the fourth quarter of the year, and troughs in the second quarter. Measured stocks of crude oil and products are usually run down near the end of the calendar year when consumers in the northern hemisphere build up their supplies (invisible stocks) of heating oil for the winter season and visible stocks are rebuilt around the middle of the following year. In 1999 the seasonal accumulation of stocks did not occur because of producers' attempts to curb production at a time when the rate of demand growth was increasing, and it contributed to the doubling of the oil price during the year. Latest data on production and consumption suggest some replenishment of stocks of oil products in the middle months of this year. However, a strong seasonal demand for gasoline led refineries to bias the mix of their output towards gasoline at the expense of heating oil. In addition, it appears that stocks of heating oil held by final consumers in recent weeks have been higher than usual because of concerns about higher prices and/or shortages during the height of the heating season, as well as worries about a cold winter. (The volume of heating oil sold in the United States to final consumers has been 10 to 20 percent higher than in recent years). As a result, visible stocks of heating oil appear to be low and many market analysts have questioned the extent to which these stocks would cover seasonal demand, especially should the weather in the northern hemisphere be colder than average. For this reason the price of oil this year has been unusually sensitive to weather information and this situation is likely to persist throughout much of the winter.
With stocks so low, the market has become highly sensitive to news relating to short term supply changes and much attention is given to the actions and intentions of OPEC. On October 30, after the price of oil in the OPEC basket had stayed above its agreed price range of $22 to $28 for twenty consecutive working days, OPEC announced a half million barrel per day increase in the aggregate production target for its members. As in the three previous increases in production targets this year, the new target failed to bring down the price to the upper level of the target range. Recently, however, the concern of many OPEC members has turned to the possibility of "overproduction" should the current tight market conditions ease early next year. At its regular meeting held on November 12, OPEC decided that production targets should not be increased until the group's meeting in mid-January when they would be reconsidered.[7] Saudi Arabia, however, has stated that it remains ready to provide extra deliveries should prices surge again.
In addition, many short-term political developments and problems along the production-consumption chain, which in periods of ample stocks would receive little attention, are adding to [...]
). If you have the permission, you can login now.