How Oil Prices Affect World Economy

Antai College of Economics & Management

Shanghai Jiao Tong University

Master of International Business (MIB)

Lecturer: CHE Yi

International Economics: Literature Review

“How the Current Fall of Oil Prices Affects the World Economy”

Rosa Rigual Fernandez 学号: 1141209794

Date: 5th January 2015

Table of Contents

Table of Contents 2

1 Research Motivation 3

2 World Scenario 3

3 Current oil price conditions 4

4 Causes of oil price decrease 5

5 Effects on the world economy 6

References 8

1. Research Motivation

My interest and main motivation for choosing the topic I will develop, is the importance and impact of oil price fluctuation for my country, Venezuela, as it has an almost absolutely oil-based economy. Venezuela’s oil revenues represent about 95% of the country’s export earnings, and about half of the central government’s income. The oil exports are responsible for about one third of Venezuela’s gross domestic product (GDP). Venezuela is a founder and important member of the Organization of the Petroleum Exporting Countries (OPEC). In 2013 it ranked the world's 9th largest exporter and 12th largest producer of petroleum, it has consistently been one of the top five suppliers of crude oil to the United States, and it plans to become one of the most important crude suppliers for China in a short to medium term, since the last visit of the Chinese President to Venezuela in July of last year. Besides that, my country has the largest crude oil and the second largest natural gas proven reserves in the world. However, it currently faces a very profound economic crisis.

2. World Scenario

Regarding oil production and consumption, the world is divided in two different groups of countries:

• Exporter countries (producers). Example: Saudi Arabia, Russia, Kuwait, Iraq, Venezuela, Union of Arabian Emirates...