Debate the Notion That the World Economy Will Once More Be Derailed by an Oil Price Shock
Date – 8th/11/2011
Title – Debate the notion that the world economy will once more be derailed by an oil price shock
Debate the notion that the world economy will once more be derailed by an oil price shock.
Introduction
The Middle East countries producing oil cornerstone and centrepiece of global energy security. It is simple to understand why, as noted by Bakshi (2007) in 1986, the Middle East as a region exported 46% of oil the Organization for Economic Cooperation and Development Countries (OECD, USA, Canada, Australia and the Europe). At the same time, it accounted for 85% of spare oil production. At the beginning of this year (2011), North African and Middle East suffered political disturbances, with citizens demonstrating against the leadership of their countries. The demonstration started in Tunisia, where a long serving president was ousted by popular revolt, they quickly spread to Egypt, Libya, Bahrain, Syria and unrests have been reported in other countries like Saudi Arabia (Bingaman, 2011). The term Arab Spring has been coined to explain this popular unrest, which when it began saw the oil prices rise by 29% (Singh, 2011)The biggest debate is whether such happenings result in the world economy to once more be derailed by an oil price shock. But to have a better understanding of this ongoing debate, and to get a correct answer, it is important to look back at the recent history of the region and try to realise the main cause factors for this current situation.
The beginning of Middle East Oil Power,
As early as 1930s, the American and Western oil companies mainly, Chevron (initially called Standard Oil Company of California), had set up shop in Saudi Arabia oil fields. For nearly three decades, from 1930s to the 1960s, a loose international structure regulated the international oil industry. Oil exploration, expansion, refining and marketing was done by seven integrated oil companies referred to as ‘seven
Title – Debate the notion that the world economy will once more be derailed by an oil price shock
Debate the notion that the world economy will once more be derailed by an oil price shock.
Introduction
The Middle East countries producing oil cornerstone and centrepiece of global energy security. It is simple to understand why, as noted by Bakshi (2007) in 1986, the Middle East as a region exported 46% of oil the Organization for Economic Cooperation and Development Countries (OECD, USA, Canada, Australia and the Europe). At the same time, it accounted for 85% of spare oil production. At the beginning of this year (2011), North African and Middle East suffered political disturbances, with citizens demonstrating against the leadership of their countries. The demonstration started in Tunisia, where a long serving president was ousted by popular revolt, they quickly spread to Egypt, Libya, Bahrain, Syria and unrests have been reported in other countries like Saudi Arabia (Bingaman, 2011). The term Arab Spring has been coined to explain this popular unrest, which when it began saw the oil prices rise by 29% (Singh, 2011)The biggest debate is whether such happenings result in the world economy to once more be derailed by an oil price shock. But to have a better understanding of this ongoing debate, and to get a correct answer, it is important to look back at the recent history of the region and try to realise the main cause factors for this current situation.
The beginning of Middle East Oil Power,
As early as 1930s, the American and Western oil companies mainly, Chevron (initially called Standard Oil Company of California), had set up shop in Saudi Arabia oil fields. For nearly three decades, from 1930s to the 1960s, a loose international structure regulated the international oil industry. Oil exploration, expansion, refining and marketing was done by seven integrated oil companies referred to as ‘seven
References: Idea of Gas-Tax Holiday Runs into a Dead End,” Associated Press, July 19, 2008. Spence, M. 2011. Oil Price Shocks and Global Recovery: Retrieved on 8/11/2011 from: http://www.cfr.org/economics/oil-price-shocks-global-recovery/p24299 Hamilton, J.D., April 27, 2009 Laessing,U February 23, 2011. “Saudi King Back Home, Orders $37 Billion in Handouts,” Reuters, Maki, D., February 24, 2011.Barclays Capital, as quoted by Motoko Rich et al., “Rising Oil Prices Pose New Threat to U.S Crawford, N., Feb 28, 2011.Will High Oil Prices Derail the Global Economy? Retrieved on 8/11/2011 from: http://wallstreetpit.com/64035-will-high-oil-prices-derail-the-global-economy Mouawad, J and Krauss,C., March 1, 2011 Bingaman, J., March 2, 2011. “World Oil Supplies,” remarks in the Senate, Congressional Record, daily edition, vol. 157, pp. S1106-1107. Parussini, G., March 5, 2011.“IEA: Libya Unrest Starting to Hit Oil Supplies,” New York Times, Singh, V