I. of these studies is valid for



oil is one of the most important commodity products in today’s industrialized
economy, since it is a very important energy source for many countries. Oil is
an important commodity that affects world economies due to its strategic
nature. Fluctuations in world oil prices are affecting the current government
revenues. Developments in oil prices, in addition to price movements and
economic growth on the earth, add to the impact on the total as well as labor
market issues.

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      Since the
1970s, when he saw his first major movements at world oil prices, the price was
subject to price fluctuations, thus triggering the link between oil prices and
economic growth. At that time, the United States was the dominant economy,
which inevitably led the world to examine the relationship between
macroeconomists and changes in oil prices. Meanwhile, the empirical literature
began to expand its horizons and economists began exploring how oil price
movements affected economic growth in other importer countries. Since then,
there has been a large literature exploring the relationship between oil prices
and GDP. The majority focuses on the Organization for Economic Co-operation and
Development (OECD). The relatively small number of these studies is valid for
oil exporting and developing countries. Moreover, the current literature on
petroleum exporting countries generally only focuses on the economics of a
single country or a few countries. There is no literature reviewing the groups
of countries exporting to examine their possible inconsistencies.


Price Shocks

      There are some concept which associated with
the study. The five important issue related to study include oil price shocks,
inflation rate, GDP growth, exchange rate and investment rate. Each of these is
detailed as fallow.1
GDP growth, the measure of economic growth. The amount of goods and services
produced over time in an economy is called the output / economic growth of that
country.2 Inflation,
a constant rise in the general price level of goods (goods and services) over
time in an economy is called inflation.3
Investment, Radcliffe has described investments as the production of newly
produced physical things such as houses, machinery, factories and stocks of
Exchange rate, the price of one currency for the purpose of conversion to
another one is called exchange rate.5
Oil shocks simply reflect
fluctuations in global crude oil prices as a supply or demand response on the
market. 6 At
the begining, international oil companies were the determinants of oil prices
before the 1970s, and the Organization of Petroleum Exporting Countries (OPEC)
has begun to change the price of oil by identifying supply quotas. However,
towards the end of the 1980s world oil prices are always determined by a
market-related pricing system that relates oil prices to the market price of reference
crude oil.7

    Supply and
demand equilibrium are the main forces determining the price of petrol in the
international oil market; each of those market forces is influenced by many
drivers. By the time, petroleum demand derives from economic growth rates and
productivity gains in the broader regions of the world, or from
energy-efficient technology or new innovations such as new for oil. However,
such structural determinants tend not to change rapidly and for this reason, it
is unlikely that they will form the basis of an oil price shock on their own.
In addition, China’s extraordinary economic growth has significantly affected
the world’s oil demand. On the contrary, weak demand after the financial crisis
in Asia in 1997 may cause short-term difficulties in global oil prices.

that are not OPEC and OPEC members are suppliers to the crude oil market;
output normally depends on political and sometimes economic factors.8 At
long last, oil supply is usually determined by the level of extraction,
reserve, depleted and efficient oil extraction that leads to new oil finds and
improved oil recovery at the same time. Short changes in OPEC production quotas
due to technical failures or political reasons, such as Iraq’s oil-rich lands
and Niger deltas, war and militancy, and international sanctions for oil, are
temporary obstacles to supply. They are of great importance for the pandemic.
This also affects oil prices.


1 Monesa, Laila Taskeen Qazi, The Effects of Oil Price
Shocks on Economic Growth of Oil Exporting Countries: A Case of Six OPEC

2 Weil, D. N., Economic Growth (2nd ed.). New Jersey:
Pearson Education Inc., 2009

3 Curwen, P. J., Inflation. California: Macmillan
Press, 1976

4 Radcliffe, R. C., Investment: concepts, analysis, strategy
(5th ed.). London: Harper Collins, 1996

5Tauline, M.J., Exchange Rates: Dynamics,
Expectations and Adjustment. New York: Nova Science Pub Incorporated, 2008

6 Hamilton, J.D, Oil and the Macroeconomy since World
War II, The Journal of Political Economy, Vol. 91, No. 2

7 Farrell, G. N, Kahn, B. and Visser, F J. 2001. Price
Determination in International Oil Markets: Developments and Prospects. South
African Reserve Bank Quarterly Bulletin, No. 219. March 2001


8Farrell, G. N, Kahn, B. and Visser, F
J. 2001. Price Determination in International Oil Markets: Developments and
Prospects. South African Reserve Bank Quarterly Bulletin, No. 219. March 2001

First Oil Shock, 1973 – 74

    The oil
crisis which started 1973 or the first oil dispute that began on October 15,
1973 was originate from the Arab-Israeli war, which embargoed oil exports to
the Arab oil producing countries, particularly to the US and the Netherlands.
The Netherlands provided arms to Israel and allowed the Americans to use Dutch
airports to procure and support Israel. Since the United States, the
Netherlands and some other countries perceive Israel as a powerful ally, they
have declared an oil embargo on Western countries to force Arab lands to leave.
This comes at a time when OPEC’s production is beginning to affect the global
oil market by reducing volume and unilaterally increasing prices. The price of
oil rose from $ 3 per barrel to about $ 11.65 per barrel in 1974 on a global
scale. This has caused serious consequences for many developed countries,
including high inflation, which led to serious price hikes and thus stagnation.1

1 Llie, L.
,Economic considerations regarding the first oil shocks, 1973 to 1974, Lucian
Blaga University of Sibiu, . 2006 


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