What is the impact of oil price rise on various sectors of economy?

Essay by sankit20University, Master'sA-, October 2006

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Global price rise Scenario

A price rise in Crude oil from March 1999 up till present day has brought price rise in the Fast moving consumer goods and oil products. It was expected that Organization of Petroleum Exporting countries (OPEC) will encourage the producers to boost Crude Production to 2.0 Million barrels a day. This mass increase in Crude production would help developing and developed countries to save there economic conditions from getting impacted by inflation and price rise on every consumer durable goods. This oil price is noticed since late 1970's.

* West Texas Intermediate in constant (July, 2005) U.S. dollars. SOURCES: Federal Reserve Bank of St. Louis, and Bureau of Labor Statistics

The high oil prices were not due to the high demand from all economies but also due to war threat on major oil producers like Iran. Even the ongoing war in Iraq has played vital role in rise of crude prices as showed in the graph.

Recent increase in oil prices has lead to substantial slowdown in growth rate and increase in inflationary pressures for all countries world wide. The IEA (International Energy Agency) said that crude demand has increased to 82.2 million barrel per day worldwide (BBC News). The inequality in demand and supply in oil production and various geo-political factor has lead to high crude price which have risen to its highest level. This price rise is also expected to rise in future. The Global increase in price rise has leaded to increase in price rise in every single country and its major economic sectors are affected.

Global effect of price rise scenario

The latest projections made by World Economic Outlook which was based on recent reports presented by IMF (International Monetary Fund). Oil acts as a life blood to every nation of world.