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Analysis of fluctuations in the price of oil.

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Introduction

Business Internal Assessment Task 5 Crude Oil (Petroleum) The price of crude oil is very important to international security as it is a major part of everyday life: transport, economics, food price of oil fluctuates but can spike depending on several factors such as war, political instability, recession etc. All of these factors affect "Supply and Demand" which, as a result, affects oil prices. If there is a high demand for a commodity, then the supply will have to increase to meet the demand, if the supply surpasses the demand, then the price will decrease because of the high supply of that commodity. For example: If an oil rich such as Saudi Arabia (the largest exporter of crude oil in the world) cannot supply a sufficient amount of oil to the world market then the overall SUPPLY of oil in the world market will DECREASE therefore INCREASING the DEMAND and henceforth price of oil. ...read more.

Middle

The cause of the spike in early 2011 is mainly due to the Middle East and North Africa unrest; the two regions combined hold approximately 60% of the world's proven oil reserves, Libya; which is currently facing protests produced a steady production of 1.5 million barrels per day, but due to the unrest it has cut more than 70% of production. Potential unrest in other oil-rich countries in the region has also triggered oil prices to soar; experts fear the current protests may lead to"domino-effect" and cause unrest in countries with larger oil reserves than that of Libya such as Saudi Arabia, Iran and Iraq. "The Organisation of the Petroleum Exporting Countries" more commonly known as OPEC is a major player and has a big influence on crude oil prices. ...read more.

Conclusion

Although OPEC isn't as influential as it once was due to the discovery and development of new oil reserves in Canada, Alaska, and Arctic Russia. It still holds 79% of the worlds proven oil reserves and 44% of the world's crude oil production. Due to the political unrest in the Middle East and fears in the Western world of the shortage of oil, prices have soared to record heights which is why OPEC member states have agreed to increase their output to meet international needs. I have come to the conclusion that the most influential factor causing changes in the price of crude oil in the past 12 months has been the unrest in the Middle East; it has affected several oil-rich countries and struck fears throughout high oil-consuming nations, it has caused a sharp increase in prices due to fears of the unrest affecting more oil-rich countries. ...read more.

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