Impact of Global Recession Essay Example | Topics and Well Written Essays - 2500 words

Impact of Global Recession - Essay Example This all highlights the significance of this fossil fuel. The world market of oil is such that it is highly controlled by OPEC. In fact, OPEC has been thought to behave like a cartel. It especially behaved like a cartel during the 1970s when an embargo was placed on the Western economies, which plunged their economies into deep recessions (Bouchentouf, 2007). In addition, much of the oil supply is located in highly unstable markets, therefore the market of oil is highly volatile (Behr, 2009). The United States is the third largest producer of oil after Russia and Saudi Arabia (Bouchentouf, 2007). However, it consumes the production of oil drastically to support its huge industrial based economy. The United States also imports much of the oil in the world and Japan and Germany are one of the largest importers of oil. The United States and China are currently the largest consumers of oil (Bouchentouf, 2007).Literature ReviewThe sudden decrease in the price of oil as shown in the figure above was because as the recession hit countries all around the world, demand gradually decreased. Because of the drastic decrease in demand, the OPEC to curb the decreasing prices cut down outputs. World oil demand continuously fell across the period from 2008 to 2009. In 2008, world demand had fallen by 0.2 percent, and in 2009, it had fallen by 0.4 percent. The Economist Intelligence Unit (EIU) had predicted at the beginning of the crash, that the ensuing years would see a decrease in the demand.... It has large importance for the world economy. The demand of oil is such that it is inelastic, that means even if the price rises, people would continue to buy it. Oil is indispensable and is a raw material for various other products. However, oil has an inelastic supply as well, that means since it is a non-renewable resource, it will eventually run out. This all highlights the significance of this fossil fuel. The world market of oil is such that it is highly controlled by OPEC. In fact, OPEC has been thought to behave like a cartel. It especially behaved like a cartel during the 1970s when an embargo was placed on the Western economies, which plunged their economies into deep recessions (Bouchentouf, 2007). In addition, much of the oil supply is located in highly unstable markets, therefore the market of oil is highly volatile (Behr, 2009). The United States is the third largest producer of oil after Russia and Saudi Arabia (Bouchentouf, 2007). However, it consumes the production of oil drastically to support its huge industrial based economy. The United States also imports much of the oil in the world and Japan and Germany are one of the largest importers of oil. The United States and China are currently the largest consumers of oil (Bouchentouf, 2007). Literature Review The sudden decrease in the price of oil as shown in the figure above was because as the recession hit countries all around the world, demand gradually decreased. Because of the drastic decrease in demand, the OPEC to curb the decreasing prices cut down outputs. World oil demand continuously fell across the period from 2008 to 2009. In 2008, world demand had fallen by 0.2 percent, and in 2009, it had fallen by 0.4 percent. The