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.
The global oversupply of crude affects Exxon. In the fourth quarters of last year, Brent and other crudes price were down sharply more than a third to an average of cost of $80 a barrel. This affected fourth quarter earnings. Exxon’s fourth quarter earnings fell 16%. Fortunately, most experts doubt the oil price will recover until half of the year although it recently increased more than 10 percent. Although the company experienced decline in revenue, it face to positive. Exxon faces to positive from its drilling, and has in a global-wide expansion and development plan.
With average income decreasing, consumers have the incentive to save, lowering GDP. With the economy starting to fall interest rates will fall and a domino effect
Since Japan started to import LNG as a way to decrease its dependence on crude oil, LNG price mechanism has close tie with crude oil price. The LNG price in Japan and other Asian countries is determined by based on a pre-fixed price formula. Japan’s average crude oil import price is used as a benchmark of the pre-fixed price formula along with some other key components to reflect market conditions. Therefore, Japan’s LNG import prices are directly influenced by Japan’s crude oil import prices. Higher crude oil prices since early 2011, caused by instances of political instability such as the Arab Spring and Iranian nuclear crisis, have resulted in higher LNG prices in the Asian market.
The Federal Reserve rate cut has weakened the dollar. Is the rate cut benefiting the dollar? Weak dollar, lower currency compared to foreign currency, has no effect on price of local products produced in the United States. affects import and export goods. United States firms find it easier to sell goods in foreign markets.
In 2004, crude oil producers around the world expected a 1.5% growth in the world’s demand for crude oil. The actual growth rate was more than double the projections at 3.3%. This growth was due to rapidly industrializing of foreign countries such as, China and India. Therefore the lack of crude oil affected the supply of gasoline to consumers at the pump.
...gy can successfully replace oil. Just as oil will not run out overnight, its replacement will be equally gradual. The success of this transition is largely contingent on time management. Presently, there is no nation privy to a miracle solution. A bulk of available alternative energy sources are not self sufficient, and require oil to jump start their production. Solar panels, while a step in the right direction, are built in factories, shipped in trucks, flown in planes dependent on oil. Oil needs to be conserved, reserved solely for uses that will benefit future generations, such as creating green energy products. As long as there exists a shadow of a doubt as to the inevitability of peak oil, the existence of debate serves not only as an obstacle, but as a cause for hope. When everyone is forced to acknowledge the peak oil issue, it may very well be too late.
Since the 19th century, gas has gradually become a necessity to mankind. It has been used for lighting our houses, to produce heat, to cook our food and to run our vehicles. As time passed, the price of gas has known many changes in Montreal. By the year of 2008 the price was relatively low, but suddenly became very high in 2014. This year in Montreal, the prices are as low as 3.4 US $/G. When considering the previously mentioned facts, we ask ourselves why the price of gas is low and what are the factors fluctuating its price. The main factor responsible of gas price changes is the cost of oil.
"Oil Imports and Exports - Energy Explained, Your Guide To Understanding Energy." Web. 26 May 2011. .
Currently, the most important factor in the rise of gas prices is the increasing cost of crude oil. Unfortunately, the United States has three percent of the world’s oil reserves. (Horsley) In 2009, the United States was third in crude oil production as well as the world’s largest petroleum consumer. (e. I. Administration) Such consumption required and still requires the United States to import petroleum/crude oil from other countries.
Wright, R. T., & Boorse, D. F. (2011). The U.S. dependency on foreign oil presents many negative impacts on the nation’s economy. The cost of crude oil represents about 36% of the U.S. balance of payments deficit. Wright, R. T., & Boorse, D. F. (2011). This does not directly affect the price of gas being paid by consumers, but the money paid circulates in the country’s economy and affects areas such as the job market and production facilities.
Price gouging is increasing the price of a product during crisis or disaster. The price is increased due to temporal increase in demand while supply remains constrained. In many jurisdictions, price gauging is widely considered as immoral and is illegal. However, from a market point of view, price gouging is a correct outcome of an efficient market.
Interest rates and the effects of interest rates on the economy concern not only macroeconomists but consumers, savers, borrowers, and lenders. A country may react and change their interest rates, according to the prosperity of their economy. Interest rates, is the percentage usually on an annual basis that is paid by the borrower to the lender for a loan of money (Merriam-Webster). If banks decided not to use interest rates, it would be impossible for others to be able to take out loans and therefore, there would be far less spending money in the economy. With interest rates, this allows banks to take a percentage of the consumer’s money and loan it out to others, thus allowing economic growth to be possible. Interest rates also allow lenders to have a “safety net” which is necessary because there is a possibility that the borrower would be unable to pay back a loan to the bank. A nation’s interest rates can be raised or lowered and these shifts in interest rates correlate directly to aggregate demand. Aggregate demand, is the total demand for final goods and services in an economy at a given time (Business Dictionary). A nation uses interest rates for economic growth or to help prevent inflation. When economic growth is needed a nation would lower their interest rates. However, if a country is concerned about inflation, they may choose to raise their interest rates. When interest rates, raised or lowered, will have a negative or positive impact on consumers, and have a positive or negative impact on investors.
In order to fully understand the Wests urge of control over Middle Eastern oil, one must recognize the forms that those energy resources come in; given the importance of oil in almost everything produced, controlling the basic component would significantly affect the market. Petroleum products, in all of their forms, are used in four major sectors: transportation, ind...
record. The spike in oil prices, up by over 60% since the start of the
The oil refinery converts crude oil into valuable products and supplies. These products are made and sent to many countries abroad, in which are transported on land or along rivers and canals. Crude oil is then arranged and categorized into segments by fractional distillation. Raw crude oil, or unprocessed crude oil, is not normally beneficial in most industrial applications. Low sulfur crude oil has been valuable as a burner fuel to construct steam for the force of seagoing vessels. The lighter elements have the ability to construct explosive and dangerous vapors in the gas tanks. There are extremely hazardous, and are often used in war ships. The remaining hydrocarbon molecules are filtered from crude oil and used towards lubricants, feedstock, plastics, and fuels.