Price of oilThe price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Reference Basket, Tapis crude, Bonny Light, Urals oil, Isthmus, and Western Canadian Select (WCS). Oil prices are determined by global supply and demand, rather than any country's domestic production level. The global price of crude oil was relatively consistent in the nineteenth century and early twentieth century.
General equilibrium theoryIn economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium. General equilibrium theory contrasts with the theory of partial equilibrium, which analyzes a specific part of an economy while its other factors are held constant.
Economic equilibriumIn economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. For example, in the standard text perfect competition, equilibrium occurs at the point at which quantity demanded and quantity supplied are equal. Market equilibrium in this case is a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers.
Dynamic stochastic general equilibriumDynamic stochastic general equilibrium modeling (abbreviated as DSGE, or DGE, or sometimes SDGE) is a macroeconomic method which is often employed by monetary and fiscal authorities for policy analysis, explaining historical time-series data, as well as future forecasting purposes. DSGE econometric modelling applies general equilibrium theory and microeconomic principles in a tractable manner to postulate economic phenomena, such as economic growth and business cycles, as well as policy effects and market shocks.
Competitive equilibriumCompetitive equilibrium (also called: Walrasian equilibrium) is a concept of economic equilibrium, introduced by Kenneth Arrow and Gérard Debreu in 1951, appropriate for the analysis of commodity markets with flexible prices and many traders, and serving as the benchmark of efficiency in economic analysis. It relies crucially on the assumption of a competitive environment where each trader decides upon a quantity that is so small compared to the total quantity traded in the market that their individual transactions have no influence on the prices.
Peak oilPeak oil is the point in time when the maximum rate of global oil production is reached, after which production will begin an irreversible decline. It is related to the distinct concept of oil depletion; while global petroleum reserves are finite, the limiting factor is not whether the oil exists but whether it can be extracted economically at a given price. A secular decline in oil extraction could be caused both by depletion of accessible reserves and by reductions in demand that reduce the price relative to the cost of extraction, as might be induced to reduce carbon emissions.
2000s energy crisisFrom the mid-1980s to September 2003, the inflation-adjusted price of a barrel of crude oil on NYMEX was generally under US25/barrelin2008dollars.During2003,thepriceroseabove30, reached 60by11August2005,andpeakedat147.30 in July 2008. Commentators attributed these price increases to many factors, including Middle East tension, soaring demand from China, the falling value of the U.S. dollar, reports showing a decline in petroleum reserves, worries over peak oil, and financial speculation. PriceA price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the commercial exchange, the payment for this product will likely be called its "price". However, if the product is "service", there will be other possible names for this product's name.
World oil market chronology from 2003From the mid-1980s to September 2003, the inflation adjusted price of a barrel of crude oil on NYMEX was generally under 25/barrel.Then,during2004,thepriceroseabove40, and then 60.Aseriesofeventsledthepricetoexceed60 by August 11, 2005, leading to a record-speed hike that reached 75bythemiddleof2006.Pricesthendroppedbackto60/barrel by the early part of 2007 before rising steeply again to 92/barrelbyOctober2007,and99.29/barrel for December futures in New York on November 21, 2007. 1990 oil price shockThe 1990 oil price shock occurred in response to the Iraqi invasion of Kuwait on August 2, 1990, Saddam Hussein's second invasion of a fellow OPEC member. Lasting only nine months, the price spike was less extreme and of shorter duration than the previous oil crises of 1973–1974 and 1979–1980, but the spike still contributed to the recession of the early 1990s in the United States. The average monthly price of oil rose from 17perbarrelinJulyto36 per barrel in October. As the U.S. Price controlsPrice controls are restrictions set in place and enforced by governments, on the prices that can be charged for goods and services in a market. The intent behind implementing such controls can stem from the desire to maintain affordability of goods even during shortages, and to slow inflation, or, alternatively, to ensure a minimum income for providers of certain goods or to try to achieve a living wage. There are two primary forms of price control: a price ceiling, the maximum price that can be charged; and a price floor, the minimum price that can be charged.
EconomyAn economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of scarce resources. A given economy is a set of processes that involves its culture, values, education, technological evolution, history, social organization, political structure, legal systems, and natural resources as main factors.
Market economyA market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.
Partial equilibriumIn economics, partial equilibrium is a condition of economic equilibrium which analyzes only a single market, ceteris paribus (everything else remaining constant) except for the one change at a time being analyzed. In general equilibrium analysis, on the other hand, the prices and quantities of all markets in the economy are considered simultaneously, including feedback effects from one to another, though the assumption of ceteris paribus is maintained with respect to such things as constancy of tastes and technology.
Futures contractIn finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price. The specified time in the future when delivery and payment occur is known as the delivery date.
ScarcityIn economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good." If the conditions of scarcity didn't exist and an "infinite amount of every good could be produced or human wants fully satisfied ... there would be no economic goods, i.e. goods that are relatively scarce..." Scarcity is the limited availability of a commodity, which may be in demand in the market or by the commons.
Price floorA price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. A price floor must be higher than the equilibrium price in order to be effective. The equilibrium price, commonly called the "market price", is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal (in a perfectly competitive market).
Computable general equilibriumComputable general equilibrium (CGE) models are a class of economic models that use actual economic data to estimate how an economy might react to changes in policy, technology or other external factors. CGE models are also referred to as AGE (applied general equilibrium) models. A CGE model consists of equations describing model variables and a database (usually very detailed) consistent with these model equations. The equations tend to be neoclassical in spirit, often assuming cost-minimizing behaviour by producers, average-cost pricing, and household demands based on optimizing behaviour.
Optimal taxOptimal tax theory or the theory of optimal taxation is the study of designing and implementing a tax that maximises a social welfare function subject to economic constraints. The social welfare function used is typically a function of individuals' utilities, most commonly some form of utilitarian function, so the tax system is chosen to maximise the aggregate of individual utilities. Tax revenue is required to fund the provision of public goods and other government services, as well as for redistribution from rich to poor individuals.
Economic policyThe economy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the economy. Most factors of economic policy can be divided into either fiscal policy, which deals with government actions regarding taxation and spending, or monetary policy, which deals with central banking actions regarding the money supply and interest rates.
