Business Economics: The petrol exporting nations
The global oil prices have dropped sharply in the last one year. This has led to major revenue shortfalls in majority of the universal energy exporting nations. Consequently, the consumers in most of the importing countries will be affected either positively or negatively and therefore they are likely to have to pay less or more in order to heat their homes, drive their cars or carry out their daily businesses that require the use of petroleum (Ashay 2015).
In terms of the global petroleum trade being carried out, the aggregate supply and the aggregate demand (AD and AS) are referred to as macroeconomic models which have been structured in order to explain the various levels of oil prices and the output. Therefore, it is considered as a primary and simplified representation that is used in the current modern field of microeconomics in relation to calculations of oil prices and the business economics related to global petroleum trade (The World Bank Group 2015).
The aggregate demand and the aggregate supply model have therefore been accepted and hence used by a large number of economists to carry out relevant predictions in relation to the oil price levels. In addition, the model can also be connected to other necessary models in the formulation of other variables and in the determination of factors such as global unemployment and global price inflation that affects the various economies.
The two models directly or indirectly affect the business economics by limiting the flow of related factors such as the capital investments, consumer level of spending, the exports, and the imports of other goods and many other connected factors, which end up impacting either negatively or positively on the country. Majority of the oil-exporting countries are found in North Africa and the Middle East. Other nations include Afghanistan and Pakistan while other are located in Central Asia and Caucasus.
The Effect of Oil Prices on The petrol exporting nations
Normally, when the universal economic growth is considered strong, the existing higher levels of oil demand will subject the oil prices to go up. The consistent fluctuation of the oil prices implies that the different types of economies in the petrol exporting nations will be affected differently. These economies will definitely be impacted negatively because of the instability in the oil prices. Falling in the prices of oil means that the exporting nations will have to receive less for production because of the great redistribution of wealth that will be associated with the fluctuation (Tim 2015).
A close analysis dictates that the lower prices of petroleum will definitely challenge the exporters and more profits will end up being directed to the economies of the importers. This implies that the exporters ought to effectively adjust their consistent levels of spending over time. They also have to reform their subsidies in order to create an effective trade and boost their profits.
It is clear that the sharp drop in the prices of petroleum that is being observed in the exporters has had a major impact in the world economy. It is obvious that such effects end up affecting almost everyone in different ways that are relevant to their daily lives. The importance of the exportation of crude oil directly affects the global financial crisis making the crisis to be more severe and extensive. The global economic growth rate has gone down and the process of picking up is becoming stressful (Heinz-Peter & Hamad 2014).
There are several existing fundamentals of the demand and supply logistics, which widely affect the fluctuations in the prices of oil affecting the petrol exporting nations. The financialization of commodities affects the large numbers of existing investors. This is mostly characterized by the other businesses that are present in the world. The commodity prices that are present and the regulatory changes that keep differing, has also had an impact on the exporters (The Canadian Press 2014)
The Organization of the Petroleum Exporting Countries (OPEC) tends to regulate the petroleum oil prices. This is done through the regulations of the mining process and the global distribution of the commodity depending on the economies that are present and their requirements. The consumption patterns are also relevant because they dictate the equality in terms of the distribution of the products. All countries can never be equal and therefore such factors will have to be identified and corrected to avoid exportation mistakes coming out of the global petroleum exporting countries (Felix 2015).
There are two factors, which are said to be directly affecting the petroleum exporting countries. These factors include the oil prices and the level of demand. Definitely, demand and supply are key factors because the increase in demand will affect the supply and decrease in the demand of oil, will also affect the supply significantly. Currently, the reduction in the oil prices seems to be responsible for the declining market power that the Petroleum Exporting Countries are experiencing (Republic of Turkey Ministry of Foreign Affairs 2011).
The petroleum exporting countries are said to be affected differently by these oil prices. The effects revolve around the environmental policy priorities, the social, economic and political factors of all the nations in the world that are part of the consumption groups in the modern world. Considering the universal context, the process of oil distribution, the transactions of the resources of oil and the general exploitation of oil commodities, the exportation of oil will directly affect the connections or interrelationships existing between the countries. Presently, it is considered that the production of petroleum has ended up creating different forms of interdependencies especially in the global market. All these interdependencies are usually uneven. Other relevant factors include the consistent security of demand and supply affecting the exportation process, and then there are other financial and informational structures, which have also played different roles in the fall of the global oil prices (Eckbo 1976).
The petrol exporting nations have been affected with conflicts because of the changes in the global oil prices. This has largely contributed to geopolitics, which directly affects these exporters’ economies. The level of growth and development becomes low mostly because these exporters are suffering from a consistent lack of necessary, accurate, and timely information that is significant in the determination of the global oil prices. The oil cartels find it difficult to effectively manage this relevant information and create the necessary changes that will later be consideredimportant to the economy (Rosie 2015).
Globally, there are also different organizations of the oil producing countries. It is therefore obvious that any simple shift in the oil prices will create conflicts between these organizations. Irrespective of the fact that OPEC is the global association of exporters, the other organizations also determine the global aggregate demand and the aggregate supply model and the related forms of business economics that are associated with the exportation of petroleum (Organization of Petroleum Exporting Countries 2015).
It is considered that the weaker oil prices will greatly affect the economic revenues and consequently the relative power that some global oil exporters have. As a powerful organization that carries out the exportation of oil, OPEC’s activity of pricing oil will end up having a major impact on the global prices, the universal output and also the exchange rates more especially in the industrialized nations that largely depend on oil for various activities (International Monetary Fund 2015; Timothy 2015).
There are many countries, which have been largely affected by economic factors such as inflation due to the mismanagement of the natural resources such as petroleum. Such countries include Venezuela where the effect of global oil prices is considered to be extensive and the country is almost testing the feelings of recession. There is some oil producing countries whose economies are still oil dependent. The battles in some countries also end up affecting the economies. The daily black market sales that some oil producing countries make ends up impacting negatively on the economies. The money acquired from such sales turns out to be irrelevant and insignificant to the nation and that is how this oil exporting countries end up losing most of the government revenues through the exports (Dennis & Jeffrey 2000; Clifton 2015).
Some nations are part of the largest oil exporters but are still dependent on the revenue that comes from the exportation of oil commodities. This implies that the economies of such countries are constantly falling. Globally, the Organization of Petroleum Exporting Countries has a direct effect on the world trade hence the need for an improvement in the world trade. The impact of oil in the world economy also calls for some form of economic business stability, which will be based on factors such as justice, members promoting full mutual understanding, and ensuring there is a genuine concern more especially in relation to the well-being of all the people in the world. Universally, many of the world’s developing countries will end up benefiting from the lowering oil prices but the oil exporting countries will have a negative impact on the lowering oil prices (Adelman 1982; Jackie 2014).
The production of crude oil by the Organization of the Petroleum Exporting Countries is considered as a very significant factor that directly impacts on the global oil prices. As the leading exporter, OPEC tries to find out the possible ways that will be used in the management process of the production of oil and the exporting. This can be achieved through setting of targets that will effectively manage the whole process. The global characteristics of these oil prices are not only determined by the current fundamentals of the demand and the supply of oil. The future of the global oil prices is also determined by the projected future demand and supply based on the flow of the commodity. There are expectations of the future demand and supply as projected by the aggregate supply and aggregate demand leading to creation of a balance in the whole process that will end up shaping the market conditions and the global oil prices. The improved target adjustments will also develop the business economy extensively. The existing market conditions might also end up creating more pressure on the global oil prices
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