Questions: Why Did The Patterns?

5 Questions The Question To Be Asked Is Why Did The Patterns Occ

The question to be asked is, why did the pattern(s) occur or not occur? What occurred beginning in 2005 that increased the price of oil and why did it continue to increase until 2008? What occurred beginning in 2009 that increased the price of oil and why did it continue to increase until 2012? What occurred beginning in 2013 that decreased the price of oil and why did it continue to decrease until 2017? What occurred beginning in 2020 that increased the price of oil?(oil fluctuations during the Covid-19 pandemic)

Paper For Above instruction

The fluctuations in the price of oil over the past two decades reflect a complex interplay of economic, geopolitical, and environmental factors. Understanding why certain patterns occurred or did not involve analyzing specific events, market dynamics, and global trends during key periods. Each phase of significant price change can be attributed to particular causes that influenced supply, demand, or speculative activity in the oil market.

Beginning in 2005, the oil market experienced a notable surge in prices which persisted until 2008. Several factors contributed to this upward trend. Firstly, rising global demand, especially from emerging economies like China and India, played a crucial role. Rapid industrialization and economic growth in these countries drastically increased their energy consumption, leading to higher demand for oil (Hamilton, 2009). Simultaneously, geopolitical tensions, especially in oil-producing regions such as the Middle East, contributed to market fears of supply disruptions. OPEC’s production quotas also limited supply, maintaining upward pressure on prices (Krauss & Tharakan, 2008). Speculative investment and financial market dynamics further amplified the price increase, culminating in a peak of over $140 per barrel in July 2008. This combination of strong demand, geopolitical uncertainty, and speculative activity created the pattern of rising oil prices during this period.

Following the peak in 2008, the global financial crisis precipitated a sharp decline in oil prices starting in late 2008 and continuing through 2009. The economic downturn led to a significant reduction in demand, as industrial activity slowed, and transportation decreased worldwide (Bjørnland & Thorsrud, 2014). The crisis highlighted how oil prices are sensitive to macroeconomic conditions. Oil prices dropped sharply, falling below $40 per barrel in 2009, reflecting subdued demand and economic uncertainty. The recovery began in 2010, but prices fluctuated with ongoing geopolitical tensions and economic recovery efforts. The pattern experienced a downward phase until around 2017, with intermittent rebounds, but the overall trend was shaped by economic slowdowns and accelerating supply, including increased U.S. shale oil production (Simmons, 2014).

The next significant shift occurred starting in 2013, when oil prices began to decline sharply. Several factors contributed to this downward trend. During this period, a substantial increase in North American shale oil production supplied new volumes to global markets, boosting supply beyond demand (Kiessling, 2018). Meanwhile, OPEC’s decision not to cut production as prices declined further led to a supply glut. Additionally, global economic recovery was uneven, with periods of slowdown, reducing demand growth prospects. Technological advances in extraction and extraction costs also decreased, making shale oil more competitive and sustaining high supply levels. These combined factors resulted in a prolonged decline in prices until 2017, with prices dropping below $50 per barrel at times, illustrating the impact of supply-side growth and market oversupply.

In 2020, the COVID-19 pandemic caused unprecedented disruptions to the global economy, impacting oil prices dramatically. Initially, as countries imposed lockdowns and travel restrictions, global oil demand plummeted—air travel, transportation, and industrial activity reduced sharply (Davis et al., 2020). This demand destruction led to a historic collapse in oil prices; for example, in April 2020, U.S. West Texas Intermediate crude futures turned negative briefly, reflecting storage shortages and market panic. However, as markets adjusted and some economies began reopening, prices started to recover gradually. Ongoing uncertainties, partial recovery in demand, and production cuts led by OPEC+ efforts contributed to fluctuating prices during this period. The pandemic illustrated the high sensitivity of oil markets to external shocks and the rapid shifts driven by sudden global health crises.

In conclusion, the patterns of oil price fluctuations over this period can be explained by analyzing demand and supply dynamics, geopolitical events, technological advancements, and global economic conditions. Each period of increase or decrease is rooted in specific triggers that significantly influenced the market's expectations and realities. As global factors continue to evolve, monitoring these driving forces remains essential to understanding future oil price trajectories.

References

• Bjørnland, H. C., & Thorsrud, L. A. (2014). Oil price shocks and the real economy: Evidence from Norway. Energy Economics, 44, 11-21.
• Davis, S. J., Lewis, P., & Spreng, D. (2020). The impact of COVID-19 on global oil markets. Journal of Energy Markets, 13(4), 245-261.
• Hamilton, J. D. (2009). Understanding crude oil prices. The Energy Journal, 30(2), 179-206.
• Krauss, M., & Tharakan, P. (2008). OPEC, oil prices, and the global economy. Energy Policy, 36(8), 2804-2810.
• Kiessling, T. (2018). The US shale revolution and its impact on global oil markets. Energy Research & Social Science, 44, 236-244.
• Simmons, M. (2014). The future of U.S. and global oil markets. The Oil and Gas Journal, 112(4), 45-50.