...Oil Prices and the U.S Trade Deficit Along with the financial industry, chemical industry and entertainment industry, the energy industry is one of the top markets in the United States with oil production as one of its core essentials. Since the beginning of 2002, oil prices have almost quadrupled overtime. The United States is estimated to be the number one country of oil consumption therefore making the soaring prices one of the major concerns within the country. Although the amount of U.S imports and exports have varied overtime, recently the U.S has been running trade deficits. With the price of oil increasing, an oil-importing country like the U.S will have a substantial increase in the cost of petroleum imports therefore suggesting the deterioration of their trading deficit will be even greater. In this study, Michele Cavallo examines the changes of oil prices and how they affect a number of different factors. These factors include the slow-paced growth in oil production creating has an increase in demand which has outpaced the increase in supply. Cavallo explores the relationship between the surge in oil prices and trade, how the U.S trade deficit evolves in response to higher oil prices and furthermore creates a model that helps explain how the import of oil, despite the increase in price, remained constant and what affect it has on the trade deficit. Using data from January 2002 to July 2006 for overall trade balance and the petroleum trade balance, Cavallo...
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...OUTLINE Introduction A. What effects can produce oil prices increase? a. Brief history and evolution in oil markets b. Causes of the increment in oil prices B. Colombia on the two sides of oil prices rise effects c. Brief description of effects d. Brief history of petroleum industry Body I. International context a. Global situation of oil prices b. Volatility and Dutch disease II. Colombia Case c. analysis of effects in the macroeconomic view: inflation and currency appreciation Conclusion A. Which are the solutions to control the harmful effects of oil prices increase B. What strategies are implementing in Colombia to deal with the effects of oil prices increase. Thesis statement Since the 1970s the world hadn`t experienced an oil increase like the one that is happening these days where many countries are concerned about the effects that this phenomenon can bring to their economies. As an oil exporting country, Colombia has to deal with a lot of challenge in order to transform all the revenues from petroleum into benefits to their society. However there are some effects that can bring some instability to this small economy, especially the one that international markets create a speculative bubble which can end in the Dutch disease. ‘The Dutch disease is a major market failure originating in the existence of cheap and abundant natural or human resources that keep the currency of a country overvalued...
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...Boston College Economics The Stata Journal (yyyy) Working Paper Number ii, pp. 1–38 vv, No. 667 Enhanced routines for instrumental variables/GMM estimation and testing Christopher F. Baum Mark E. Schaffer Boston College Heriot–Watt University Steven Stillman Motu Economic and Public Policy Research Abstract. We extend our 2003 paper on instrumental variables (IV) and GMM estimation and testing and describe enhanced routines that address HAC standard errors, weak instruments, LIML and k-class estimation, tests for endogeneity and RESET and autocorrelation tests for IV estimates. Keywords: st0001, instrumental variables, weak instruments, generalized method of moments, endogeneity, heteroskedasticity, serial correlation, HAC standard errors, LIML, CUE, overidentifying restrictions, Frisch–Waugh–Lovell theorem, RESET, Cumby-Huizinga test 1 Introduction In an earlier paper, Baum et al. (2003), we discussed instrumental variables (IV) estimators in the context of Generalized Method of Moments (GMM) estimation and presented Stata routines for estimation and testing comprising the ivreg2 suite. Since that time, those routines have been considerably enhanced and additional routines have been added to the suite. This paper presents the analytical underpinnings of both basic IV/GMM estimation and these enhancements and describes the enhanced routines. Some of these features are now also available in Stata 10’s ivregress, while others are not. The additions include: • Estimation and testing...
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...Dear Stephen Harper, Ontario’s most defenseless citizens are significantly affected by social programs. We need social programs to provide income and employment support to people with financial troubles and people who have disabilities. And right now were not on a high enough pace to reach the goals that have been set for social programs. The demand for social spending is not being fulfilled. With Canada’s rapidly changing financial system, spending on social programs is key to the success of Canada’s economy. And right now instead of the government increasing social program spending, there are gradually slowing down the amount of money that is contributed to social programs. Between 2003-2007, social service spending increased only by 5% each year, where as health care increased by 6% and environment spending increased by 9%. This is not right because these programs help families with their financial securities across Canada. This needs to be increased immediately so that families can support themselves enough until they find a secure job. During the past two decades Canada’s spending on social programs have nearly doubled but still only represents 33% of total program expenditures. In March 2007, total spending on social programs was 172.4 billion compared to $79.5 billion in 1989. Though this might seem like an improvement it’s not because social programs still only represents 33% of all total program spending. If we want to help the economy faster and lower the unemployment...
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...The Oil Ministers of 12 member states of Organization of the Petroleum Exporting Countries (OPEC) concluded their meeting in Vienna on November 27 by deciding to continue with their three-year-old production quota of 30 million barrels per day (mbpd). Thus, they calculatingly ignored nearly one mbpd oversupply in the global oil market which has pushed the crude prices down by over 30 per cent since June 2014. The global oil glut, in turn, has been caused by a number of factors which include OPEC’s own overproduction, rising non-OPEC production (particularly by the U.S.-based “Shale Revolutionaries”) and lower demand from China and Europe. By declining to cut their output to shore up the prices, OPEC in general, and Saudi Arabia in particular, have refused to play the role of global “swing producer.” As most factors responsible for the current global demand-supply disequilibrium are systemic in nature, the world faces prospects for relatively bearish oil prices over the foreseeable future. Indeed, the prices have continued to fall with the Indian basket touching $72.51/barrel on November 27 — a decline of nearly $9 from the average during the first fortnight of the month. As the world’s fourth largest importer of crude, India can afford to exult at this precipitous crude price decline. Still, given the strategic importance of this development, a more comprehensive analysis is desirable. A virtuous cycle in the economy From the limited perspective of India’s consumer economy...
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...OIL PRICE VARIATIONS INTRODUCTION ..... .... .... So in this chart wich is a line graph chart we can immediately see that in 1960 oil price gradually declined from 1.0 to 0.5 % of the gdp per head in 1970 Then we can observe a slight rise from 1970 to 1973 From this moment (1970) oil price skyrocked till 1974 Between 1974 to 1978 oil price decreased from 2.0 to 1.6 % of the gdp per head Then oil price sharply increased to reach a peak in 1980 From 1980 to 1984 oil fell from 3.4 to 1.9 % of the gdp per head CONCLUSION first we would like to say that on the period of the graph GDP has grown steadily. In 1960 it was 1600 US dollars per head / capita whereas it is 42000 US dollars per head / capita today To conclude we can say that for oil price there have been 3 big trends. So the first trend was an upward trend who appeared between 1960 and 1980. The second one has appeared from 1980 to 1997 and has been a downward trend. And finally there have been a third one who was an upward trend from 1997 to our current days. We can also say that people have been right to think that oil price never been so high that now because with our money (the Euro) it is the case. But in the same time salary has also increased, it has doubled. In fact the price of gasoline has been divided by 2 compared to the salary. Another way to understand that is that in reality a regular person has to work half long in 2010 than in 1970. For the future we can imagine that oil price...
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...Oil and Gas Prices Darlene Dant COM 150 In August 2006 the American national average for a gallon of gas was $3.09. Gas prices hit an all time high in July 2008 with a national average of $4.12 per gallon. By December 2008 the national average for a gallon of gas was a mere $1.61 (GasBuddy, 2009). Due to the affect that supply and demand has in combination with state and federal taxes, America has seen significant fluctuations in gas prices. As people say, “What goes up must come down” and, in the oil and gas industry the opposite is also true, “What goes down must come up”. Fuel costs are affected by the world’s oil supply. The Organization of the Petroleum Exporting Countries (OPEC) consists of 12 members from various countries, who are the main suppliers of the world’s oil (OPEC, 2009). According to the Energy Information Administration (EIA [2009]), America gets the majority of its oil from five countries: Canada, Venezuela, Mexico, and Saudi Arabia. There are different grades, or qualities, of crude oil. Two of the most popular grades are: light-sweet crude oil (better grade) and heavy-sour crude oil (lesser grade). Depending on where the oil is coming from, it may be of a better, or lesser, grade compared to that of another country. The most desirable crude oil is light-sweet crude oil. While easily obtained in the past, light-sweet crude oil is becoming less available, causing an increase in price (Wagner, 2008). While light-sweet crude oil may have...
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...The price in oil has dropped so much in the past 3 month, which is way better than it rising I would say. One reason it’s dropped is because the price of the barrel has dropped about $20 dollars each. It’s about 50 something dollars a barrel right now, it used to be about 70 something before June. It’s a good thing, but Saudi Arabia could push other competitors away because they’re the ones selling the oil cheapest. There is a lot of oil being made that is why prices are dropping because they have too much of it. A drop in prices mean they won’t drill as many wells for the oil, but that has yet to be seen. There will come a day though when the ‘boom’ in oil will end, just no telling when. We would all love it to go down and stay down but we know that never happens. Gas hasn’t been this cheap since 2009- 2010. Which is a long time coming. I hope it continues to drop I’ve never seen gas lower than 1.59 a gallon. I want to live to say I remember when gas was .99 cents boy. There is no telling what the price will be when we get 20 years down the road because I know there is going to have to be less oil. I wish they would come out with something soon that’s better than oil. There is a reason the earth needs that oil and if it’s all gone one day who knows what might happen to the earth. It isn’t just made in the earth for nothing that’s for sure. Even though gas has dropped companies just won’t pick up and leave because they have invested millions of dollars in the well they dig. In...
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...Oil and Gas 2 There are many issues that cause the cost of oil and gas to increase. The main contributing issue to the increasing cost of oil and gas is supply and demand, when demand is greater than supply, the price of oil and gas will increase. The factors that affect supply include increased demand, problems with refineries and pipelines, and disruption to supply or threat of disruption to supply. With the increased demand for oil in the United States and other countries such as India and China; the extra demand for oil has put enormous pressure on available oil reserves. The Energy Information Administration stated, “If refinery or pipeline and/or reductions in imports cause supplies to decline unexpectedly, gasoline inventories (stocks) may drop rapidly. This may cause wholesalers to bid higher for available supply over concern that future supplies may not be adequate” (Energy Information Administration, 2008, para. 9). With this in mind, the other underlying factors that affect supply are disruption to supply or threat of disruption to supply along with The Organization of Petroleum Exporting Countries (OPEC). The Organization of Petroleum Exporting Countries is an organization of oil producing countries which produces over 40% of the world’s crude oil and has two-thirds of the world’s oil reserves. This organization was formed in 1960 to regulate the supply of oil and to some extent, the price of oil. The organization includes Algeria, Indonesia...
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...1. What has caused this major drop in oil prices? The reasons why Oil prices are falling down are twofold, they are due to the simple economics of demand and supply. First of all, we can observe a weak demand in many countries due to insipid economic growth, coupled with surging production. Developing countries and the economies of Europe are becoming less oil dependent thanks to the technology, cars are becoming more energy-efficient. So the demand for fuel is logically decreasing. Added to this is the fact, on the supply side, the oil cartel OPEC is determined not to cut production as a way to prop up prices. Moreover, countries like Saudi Arabia, Nigeria and Algeria are now competing to the Asian markets so producers had to drop prices and USA has gave up the imports as its domestic production has doubled these years. Finally lot of competitors are rising such as Canadian, Iraqi or even Russia and they manage to increase their oil production and exports every year. 2. What economic impact would these lower prices have on the world economy including the USA? Like in every changing situation, there are winners and losers. Consumers all around the world will enjoy a main benefit: less expense for the gas! Low prices are excellent news for oil consumers in places like Japan or the US, where gasoline is the cheapest it's been in years. For example, the price of the gallon, in average, fall from $3.28 a year ago to $2.07 and this drop benefit to lower-income groups in...
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...dot-com boom. The strong players will remain, the weak ones will vanish As the internet was a huge investment opportunity for every lame brained idea related to the internet now the shale industry is replaying the same scenario. The oil and gas boom in the United States was made possible by the extensive credit afforded to the shale firms. These drillers relying on debt to finance their investment they earn less then what they spend… Why the oil price decreases? The price decreased because oil and gas production is evolving so rapidly and demand is dropping so quickly, an other reason could also be the growing switch to other fuels alternatives (like gas) or energy sources (solar, wind,.. etc). Also the hybrid and electric cars contribute in loss for the oil producers… Saudi Arabia OPEC leader SA is not being cooperative in the plight of oil falling prices. Instead of cutting its production and helping to restore the prices it is keeping its output constant and offering the lowest price in the world. Meanwhile, the fact of decreasing the Saudian supplly on the market would be profitable for other producers that would sell their oil for higer price. Countries like the USA can reduce their dependence on 'foreign' energy imports, shale oil production has allowed the country to turn the corner from being dependent on the middle east for its energy...
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...Written Assignment: Falling Oil Prices On the graph I constructed above, I demonstrate how the effects of production and other countries, have impacted the prices of oil to drastically fall from an equilibrium price and quantity of $99.00 a barrel to the low cost of $49.00. My determinants include, the decrease in production costs, China’s recession, the U.S. becoming one of the top oil producers worldwide, and finally the increase of alternative energy efficient vehicles. Over the last couple of years, many new discoveries and technological advances have all led to the decrease in production costs of oil. With that being said the supply of oil has gone up and prices are decreasing rapidly. One source talks about new drilling techniques that are opening up fields of oil in the western United States that used to be out of our reach. All of the companies investing their money into these technological advances expect to achieve an increase in production by at least twenty percent (Fahey, Jonathan.) Another big contributor to the vast drop of prices is China’s recession. The crash of their market has created a chain of impact worldwide. Oil is what keeps the economy going and China being one of the biggest oil consumers was what kept the economy afloat (Carr, Michael.) Now with their recession going on, we are impacted because of the value of the dollar going down and decrease in demand. In similar news, the prices of oil drop are also due to the U.S. becoming one...
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...PUJ versus AUV Rivalry of Development and Survival In and Out of the Road The Case of Transport Industry in Metro Manila Philippines Candy Lim Chiu, MBA, Kyoto University, Kyoto, Japan Hiromi Shioji, D. Econ, Kyoto University, Kyoto, Japan ABSTRACT The Public Utility Jeepney (PUJ) industry’s days are numbered despite the fact that it is an epitome of Philippine ingenuity on hybrid vehicle, cheap transportation, means of livelihood and employment generator that spans more than 50 years as the King of the Road. Its detour in the Philippine economy continue to be challenge by factors such as indirect government support, environmental issues, social demands, economic crisis, transport competition and entrance of substitution of Asian Utility Vehicle (AUV) that collide from all direction living the industry in jeopardy. This paper examines the similarities, differences and trends of transport business and industry in the Philippines concentrating to two major rival mode namely PUJ and AUV where it present diverse lessons to be shared for future studies of transportation business and industry around the globe. Ultimately, it aims to make recommendation on measures of ensuring a level of playing field between the players with the existence of substantial economic potential, industry improvement and concrete policy instrument. INTRODUCTION From downtown city of Metro Manila famously overcrowded public utility vehicles (PUV) headed by the legendary Public...
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...The United States Foreign Policy with Israel and the Effects on the Middle East Michael Hanners Axia College of University of Phoenix The United States' support of Israel started immediately after Israel's declaration of independence in 1948, both financially and with military arms. With other Middle Eastern countries being Arab, and Israel being Jewish, there has been a religiously motivated conflict in this region of the world for more than 60 years. Many Middle Eastern countries have not nor do they believe that Israel has a right to exist. This has been a problem for the United States since its recognition of Israel. Why is this region of the world so important to the United States? The majority of the worlds oil supply comes from this region. Peace in this region is a must for the United States, however; since most Arab countries do not recognize Israel’s right to exist; it puts the United States in the sensitive position. The United States is Israel’s biggest supporter, when the United States changes policy with Israel; it puts other Middle Eastern countries in a state of uncertainty. What is now considered the Middle East; was once known as the Ottoman Empire. The Ottoman Empire was created by Turkish tribes in Anatolia. As one of the most powerful states in the world, the empire spanned more than 600 years and came to an end only in 1922 after WW I. The Empire was replaced by states in southeastern Europe and the Middle East. At its height...
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...Oil Prices’ Impact on Economic Growth Since 2008, the U.S. has seen one of the slowest recoveries from a recession since the Great Depression. Never before since World War II has either inflation adjusted GDP or unemployment rate been below where it was four years after a recession began. Our economy in this recovery could have grown and created jobs at the average rate like the 10 previous postwar recessions. GDP per person could be $4,528 higher and 14 million more Americans would be working today (Gramm and Solon). Economists claim that the lack of strength in the recovery was due to the depth of the recession and underestimating the severity of the economic disaster. Another speculation is that the financial crisis, by the very nature is a much slower and more difficult recovery. A recession is generally defined as a decline in GDP growth in a six-month period. So what can keep the GDP, or the value of all consumed goods, from returning to a healthy economic state? Oil is a primary source of energy we use everyday. The more oil we use, the faster the economy grows. Over the last forty years, a 1 percent hit to the world oil consumption has led to a 2 percent increase in GDP. That means if GDP increased 4 percent a year, like before 2008, oil consumption was increasing by 2 percent a year (Anandan, Ramaswamy, and Sridhar). Statistically, in 2006 figures display that the average oil price was $67.65 per barrel. In 2008 when the recession hit, the average oil price was...
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