Thursday, July 25, 2019

Crude Oil Prices between 1985 and 1994 Article Analysis Assignment

Crude Oil Prices between 1985 and 1994 Article Analysis - Assignment Example The authors point out that over time, competitive forces have caused a greater variance in the prices of oil in world oil markets even with the market arrangements brought by OPEC or by international oil companies. They agree with other authors such as Claudio Morana who states that both direct and indirect effects that came about because of consumption matters and technologies led to oil price volatilities (Morana, 2012, p. 2). Hence, the authors assert that between 1985 and 1994 there was a volatility in the price of oil as well as other non-oil commodities The two authors divided the article into six major parts. In the introduction, the authors introduce the trends in the volatility of the oil prices, the oil price shocks and the forces behind the volatility of the prices. In the introduction, the authors bring in a very important argument stating that the way competitive forces lead to an upsurge in oil prices, so do the factors that determine the availability and price of oil parallel the factors that determine other traded commodities (Institute for the 21st Century Energy, 2012, p. 2). In the next section titled ‘background and motivation,’ the authors look at the years before the 1985-1994 period and the manner in which oil prices were handled. The authors look at the failure of the major oil companies to set oil prices that led to the emergence of OPEC as the ultimate price determinant. They also look at the price of oil going into the 1980s period when OPEC was weakened by market forces in determining the price of oils. They point out 1983 as the most significant year when the transition to market forces happened and saw the creation of the New York Mercantile Exchange (NYMEX).

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