Falling Crude Oil Prices and it's Impact on World Economy

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Crude Oil prices have been continuously dipping since more than half of 2014. What are the reasons behind the fall of crude oil prices and it's effect on the World economy

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Oil Prices: Why they are falling and its impact on World E conomy Image Courtesy: http ://propertyupdate.com.au/wp-content/uploads/2012/07/oil.jpg

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3 Increased output from Libya Because of the civil war in Libya, oil production had decreased to 150,000 – 250,000 barrels per day. It now produces 1 million barrels a day, which may go upto 1.2 million barrels a day by next year. 2 US Oil Boom Oil Production in the US has increased as Shale oil production has gone up to 4 million barrels per day . As such, US import of oil from OPEC has reduced by half. 1 Increased Global Supply Global supply of oil has surpassed the global demand, which has resulted in the fall of prices . Image Courtesy - http:// www.news.az/photos/page-photo/133429.jpg / Why are Oil Prices Dropping?

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6 Tepid Asian Demand Countries in Asia are reducing oil subsidies, as a result of which oil demand has fallen, which in turn has resulted in increased oil prices, thereby, reducing demand. 5 Negative European Economic Outlook A slowdown is expected in Eurozone economies in 2015. The growth forecast has been cut down by IMF to 0.8% in 2014 and 1.3% in 2015. 4 OPEC Infighting There is a rivalry among OPEC members, who are trying to lower prices to maintain their market share Image Courtesy - http:// www.news.az/photos/page-photo/133429.jpg / Why are Oil Prices Dropping?

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Image Courtesy - http ://money.cnn.com/2014/10/30/investing/cheap-oil-prices-hurt-iran-venezuela-saudi-arabia / On November 27, a big meeting was held by the Cartel, and countries , like Venezuela and Iran, proposed that the Cartel (mainly Saudi Arabia ) decreases oil production in order to maintain stability in the oil prices. 1 Just to ensure it maintains its market share, Saudi Arabia, the world's largest oil producer, did not agree to reducing oil production and was willing to let prices plummet. 2 OPEC's surprising response: Let prices keep falling

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Russian budget heavily relies on its oil income More than half of its budget revenues come from selling Oil and Gas The Russian economy may go into Recession if oil prices keep falling Effect of falling oil prices on Russia Image Courtesy: http ://www.kp24.fi/data/attachments/6488fd17-c93a-453c-b788-eedd292063d9_389541.jpg

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High oil prices are one of the major factors affecting the Iranian economy. Severe economic problems may result if oil prices keep falling. Iran may decide to reach a nuclear deal with the US to ease economic sanctions. Image Courtesy - http://www.timesofisrael.com/irans-supreme-leader-undergoes-prostate-surgery // Effect of falling oil prices on Iran

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This will translate into accelerated economic growth to a forecasted 3.5% next year. Falling oil prices will cause gas prices to go down, which will result in increased consumer spending. Effect of falling oil prices on US Image Courtesy: http ://www.ulkeajans.com/images/haberler/obama_uluslararasi_toplum_gazzede_ateskes_icin_calismali_h56636.jpg

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Reduced OPEC’s global power Benefit to Western and European economies Decline in oil and natural-gas undertakings Reduction in Commodity price The devalue of Oman Increase in global demand for goods and services Global Consequences of f alling O il Prices

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