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Causes of Erratic Oil Price Fluctuations on a Global Scale

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Causes of Erratic Oil Price Fluctuations on a Global Scale
Crude oil is a significant commodity that has a far-reaching global economic impact. This is mostly because it is used as a primary raw product for extracting various forms of energy, such as diesel, petrol, and kerosene. The products extracted from crude oil are used in the various facets of human life. For instance, diesel is a crucial component used in manufacturing facilities (Mankiw 115-133). There are constant fluctuations in oil prices, making the price of a barrel of crude oil vary on a minute-by-minute scale. Fluctuations in fuel prices can be a primary factor in the cost of transportation and manufacturing to name but a few. Therefore, fluctuations in the price of crude oil have constant effects on the global economy. These effects have made many investors and citizens alike to be wary of any fluctuations (Butcher 45-77). Oil price fluctuations are bad for the global economy. High crude oil prices contribute to a higher cost of living, thereby affecting national and global economic performance. The question then begs; what is the cause of the erratic crude oil price fluctuations in global scale? There are various reasons as to why there are frequent fluctuations in crude oil prices. In particular, just crude oil production itself can cause major fluctuations in crude oil prices. For instance, reduced production would create shortage of crude oil in the market, and following microeconomics principles; the price would then automatically rise. In light of this, this term paper seeks to analyze the causes of erratic oil price fluctuations on a global scale.
The increase in the volatility of oil prices has raised a number of questions on the reasons that would be behind those fluctuations. Research shows that fluctuations in global economic activities and speculation activities are the

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