A Brief Note On The Global Price Of Petroleum Exporting...

1. Use the AS/AD framework to show the separate effects on GDP, inflation and public sector borrowing on any single national economy ( unnamed) of: a. a rise in the global price of oil Figure 1.1 Oil Supply, demand and price Source: euanmearns.com Figure1.2 SRAS shifts as a result of a negative cost shock Source: http://www.harpercollege.edu/ Higher oil price would make products price go up and moves AS curve from AS to AS1, therefore, the rise in the global price of oil will decline GDP and boost public borrowing as well. Although oil business is a good example of international cartel of oligopoly, a permanent organisation like Organization of the Petroleum Exporting Countries (OPEC) owns the power to negotiate oil price and productivity which should be able to control oil price efficiently; however, according to the diagram below, different political events or war could alter the equilibrium of AS/ AD curves easily within a short period. Figure 1.3 Oils Ups and Downs Source: Bloomberg Figure 1.4 U.S. GDP and WTI Oil Price Source: U.S. GDP and WTI Oil Price. Source: U.S. Bureau of Labor Statistics, The World Bank, EIA and Labyrinth Consulting Services, Inc. Take United States as an example, GDP trend line goes up regardless of oil price variation. Figure 1.5 U.S. Debt and U.S. domestic oil supplyShow MoreRelated Global Interdependence 1411 Words   |  6 Pagestechnology of the future, the world is becoming a smaller and smaller place. In economic terms, Global Interdependence is increasing as time goes on. In other words, we as the United States, as well as other countries, rely on each other for the three factors of production, Land, Labor and Capital. As noted in Thomas L. Freidman’s book, The World is Flat, there are several instances in which the Global Interdependence started. 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