1

Running head: Falling of Oil Prices

U3A2
Payal Shah
MBA 530: Economic & Statistical Analysis
Herzing University

FALLINGOFOILPRICES

Abstract

In the 19th Century, the discovery of oil provided new source of fuel to railroads. In 1901, there
was a huge growth in Oil Industry and became prominent factor for the economy. Since June
2014, world crude prices are falling by over 20%. From past six months, the oil price has fallen
by 40%. A barrel price was $60 which is the lowest one since June 2009. The main reason for
falling of oil prices is caused due to supply and demand. The result of the falling oil price directs
unemployment but lower cost supports economic growth, boost corporate earnings and low
pressure on fed for raising interest rates. For better results in controlling oil prices government
can ban the oil exports and raise import activities for beneficiary.

FALLINGOFOILPRICES

Oil Industry
The Oil Industry established in the 19th Century. 1901 was a booming year for Oil
Industry, around 1500 oil companies had been charted and oil became dominant fuel for the
economy. In 1933, standard oil secured to drill for oil in Saudi Arabia, which was the first
contract of Oil Company. Soon oil industry started increasing the price which was became the
characteristic of the industry. Gradually oil corporation created to develop oil found floating
on water. Oil Industry growth supplied plentiful opportunities to the economy for the
development.

Fall of Oil Price

According to IEA monthly report, US run out of spare storage capacity can put pressure
on the floating price of oil. Since June, the oil price fallen more than 40%, the barrel price was
$115 and now its below then $70. There are three main factors why theres decline in oil price.
Supply and demand, the main oil producers Iraq and Libiya and the third worlds largest oil
producers America.
Impact of Falling Price in Economy
Due to falling of oil prices, it can cause some problems in economy such as
unemployment, increases interest rates, can also cause global economy like Greece exit euro,
recovering Japan and Russian financial crisis. It can reduce transports and other businesses. It
will also reduce profitability for energy sources and it delays investments in greener forms like

FALLINGOFOILPRICES

electric cars. It can also cause traffic problems and environmental pollution by using petrol car.
Thus all these it will result on higher spending from the all affect areas.
Solutions for the Economic growth
The falling price can risk to employment and field activities thats the greater concern but if
government will continue the policy of ban to oil exports will give a good path for the near future
of the American country. As domestic price transparency is less highlighted so there is less
buyers for shale. Due to oil export ban, the domestic shale production and sell both will increase.
Oil production from the shale can result to less expensive and heavy crudes and will favor
domestic production will get better and the oil export ban policy can be stopped. This action can
push American Economy towards a more energy secure future.

FALLINGOFOILPRICES

References
E.L. (2014). Why the oil price is falling. Retrieved May 16, 2015, from
http://www.economist.com/blogs/economist-explains/2014/12/economistexplains-4

Tverberg (2015). The Real problem behind low oil prices. Retrieved May 16, 2015, from
http://oilprice.com/Energy/Oil-Prices/The-Real-Problem-Behind-Low-OilPrices.html

Mikulska (2014). Falling Oil Prices and the Oil Export Ban:Why policy Action still matters
Retrieved May 16, 2015, from Forbes :
http://www.forbes.com/sites/thebakersinstitute/2014/12/22/falling-oil-price-and-the-oilexport-ban-why-policy-action-still-matters/