Thursday, March 10, 2011
CASE STUDY: OIL Price Rise And World ECONOMY.
Recent soaring crude oil prices over time have proved ruthless in their treatment of the global economy as well as the global economy, every time there is a spike in the crude oil price the whole world has to pay for it.
Recession has always followed after a spike in the crude oil price spike. Powerful Oil lobbies manipulated the price and the demand supply mechanism has been staged managed by these powerful lobbies, and the whole world has paid the price for this.
As of date there is no alternate to the fossil fuel, still the global economy has to heavily depend of the crude.
Recent uprising in the ARAB world and particularly in Libya, one of the largest producers of the oil in AFRICA and a powerful member in the OPEC plays a pivotal role in the global economy recovery.
Apart from the G7 nations the emerging economies like India and China are major consumers of oil; their middle class aspiration with income growth along with GDP growth has played an important role in the petroleum consumption.
The BRIC nations are front runners as fur as consumption of gasoline and they too are imports, except Russia has got enough crude reserves which can sustains it’s growth.
But the like the gravitational pull of recession, which the world is still trying to overcome in spite of huge bail out the U.S. Fed has given the U.S firms to come out from recession , there is nothing left out which the U.S. fed can give to U.S. firms.
If again the U.S economy slows down the whole world economy will loose out , as the multiplier effect will not work any more. The U.S economy as predicted has missed the target
Of its GDP growth rate of 3%, it has grown 2.45-2.55%. India and China as are growing at a level of 9-10% but the inflation is about 19%, which is equally a very bad sign for the economies is growing at 2.2 % annually .
China on the other had is taking a smarter move instead of being an export driven economy it’s like India looking to boost the domestic consumption. India has been least affected by the last recession as it’s an inward domestic consumption was very high.
But as our global economies are very much interwoven if there is a leakages in any part of the global economy, other economies starts to slow down.
According to some pundits the barrel will cost US$140 even in worse scenario the speculators and manipulators may rally up the price per barrel to US $160 by end of this year.
I’m enclosing a PPT done in YouTube where every thing has been explained very carefully.
So again in 2012-2013 we are in look out for a double dip recession? What your opinion on this?