The Pros And Cons Of Crude Oil

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Crude oil is a strategic product, in the sense that it is a most necessary fuel for all industries of nations in the world. While crude oil is a most strategy input for productions, transportations, and national defends, whoever have control over this source of energy will dominate over other countries, so in addition to supply and demand factors that affect the price, consumers must pay attention to the producers and export countries that can use this product as a weapon. Such as during and after the 1973 Arab-Israeli War, the oil giant Saudi Arab, members of the Organization of Petroleum Exporting Countries (OPEC) imposed an oil embargo against the United States and other Western European countries, which including the Netherlands, Portugal,…show more content…
The embargo both banned petroleum exports to the targeted nations and reduced in oil production. So regardless of profit or loss factors of production, which does not affect in the short term, when oil prices was more than double (50 dollars) will cause the importing countries suffer from economic recession. If we look under the long term, we may wonders that to what extent the oil prices can rise and fall. Indeed, in the past crude oil prices fell below 20 dollars a barrel and then rising up to nearly 140 dollars a barrel as we have seen in the middle 2008. When looking in the long term, we may wonder where the peak and the trough of crude oil price is. One year ago, as of January 2015, the world seems happy and relieved when crude…show more content…
The WTI is described as light because of its relatively low density, and sweet because of its low sulfur content (Cite source). The WTI is the underlying commodity of New York Mercantile Exchange 's (NYMEX) oil futures contracts. If we calculated using the current buying power of U.S dollar, i.e. after eliminating the effects of inflation in the past 45 years, from 1970 to 2015, according to the NYMEX, the crude oil price of WTI has moved from 15 to 120 dollars a barrel (Cite source). When recalling the oil prices in the past to predict for the future, we have seen a lot of vicissitudes phrases. From 1974 to 1985, oil prices moved within a range of 50 to 120 dollars per barrel. From 1986 to 2004, for almost 20 years, oil prices range between 20 to 50 dollars per barrel. There are two exceptions for that time frame, however, when the crude oil price raised above 50 dollars ceiling or fall below 20 dollar floor is when Iraq attacked Kuwait in 1990 and when the Russian Federation devaluation its currency in 1998 due to the effect of the economic crisis from the East Asia in 1997. Later, from 2005 to June 2015, oil prices returned to the 1974-1985 range, which is between 50 and 120 dollars
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