Oil Price Essay

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The price of oil is one of the most important indicators of the economy. Oil, first and foremost in the energy sector, is used as inputs in various sectors. The impact of oil price changes on stock market has been widely discussed by academic researchers, investors and policy makers. Overall, the aggregate stock returns is positive or negative depends on whether crude oil prices driven by demand or supply shocks in the crude oil market (Kilian and Park, 2009).

According to the study, the price of crude oil, which is the primary fuel of the industrial activity, plays an important role in shaping the political and economic development, not only to continue to have an impact on aggregate indicators, but also to influence countries operating costs, and the income (Istemi and Berna, 2009). When the stock market is efficient, positive crude oil price shocks would negatively affect the cash flows and market values of companies, causing an immediate decline in the overall stock market returns.
On the one hand, Christos, Catherine, Stephanos (2011) has examined that rising oil prices always lead to higher transportation, production, and the cost of heating, which could put a drag on corporate earnings. Moreover, the higher oil prices impact on inflation expectations and consumer discretionary spending. As a result, inflationary pressures may cause pressure on interest rates and through this channel, affect economic activity and stock price valuation. However, investors are well associate the increase in oil prices and the economy are booming. Thus, higher oil prices may reflect stronger business performance with concomitant effects on the stock market.

Generally, although changes in the price of crude oil is often regarded as an import...

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...tionship between changes in interest rates and stock price changes (Gazi, 2009).

So, except for the Philippines all other countries show a significant negative relationship either interest rates or stock prices change with changes in interest rates or stock prices of both. So, if the interest rate is more controlled in these countries, it will provide significant benefits to exchange their shares through demand pull way more investors in the stock market, and how to push the supply of investment over the extension of the company (Gazi, 2009).

Overall, interest rates are playing an important role in our daily lives and will affect purchasing power. When interest rates fall, the trade will find it easier to finance expansion and other activities. Typically, rising interest rates will slow economic growth because consumers have less money to spend and less to borrow.
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