Fluctuation in the price of oil has been an international concern for decades, because oil is the primary export and main economic driver for many States. OPEC as an international organization is practicing its role in controlling oil prices and oil market under the rules and norms of international law. In 2014, the price of oil decreased tremendously in a way that shocked the international market. OPEC tried to stem the losses and prevent prices from falling even further, and tried to facilitate international law in the current crisis. World markets were further shocked when OPEC announced that it would not cut production, and that the market would be supplied by the usual average amount of oil exports. In contrast, WTO cut its global trade in an attempt to shore up prices in the international markets, since low oil prices affected international trade as well. In this article, I analyze the oil crisis that hit the world from 2014 to the early year of 2016 period, and the role of international organizations such as OPEC and WTO in facing international economic crises, as well as the role of international politics to assure the implementation of law.
This scholarly work is an effort to capture the effects of oil prices on the actual exchange rate between dollar and rupee. This is done with reference to the U.S. dollar as oil prices are marked in USD (U.S. Dollar) in the international market, and India is among the top five importers of oil. Using monthly data from January 2001 to May 2020. The study used the real GDP, money supply, short-term interest rate difference between two countries, and inflation apart from the crude oil prices per barrel as the factors that help define the exchange rate. The analysis, through cointegration and vector error correction method (VECM), suggests long and short-run causality amid prices of oil and the rate of exchange fluctuations. Oil prices are found to be negatively related to the exchange rate in the long term but positively related in the short term. The result of the Wald test also indicates the short-run causation from the short-term interest rate and the prices of crude oil towards the exchange rate. The present study shows that oil prices are evidence of the existence of short-term and long-term driving associations with short-term interest rates and exchange rates.
Terms of trade is an important indicator of the welfare gains from international trade to the exporting country. Terms of trade of oil-exporting countries are hypothesized to depend primarily on oil prices. The study assesses the relation between oil prices and the terms of trade of Saudi Arabia. The study uses the Autoregressive Distributed Lag method to determine the cointegration between the country’s terms of trade and oil prices for the period 2000-2018. The data for net barter terms of trade is taken from World Development Indicators and oil price is taken from Saudi Arabian Monetary Agency. The results show that oil prices and terms of trade are cointegrated and any disequilibrium between the two variables is corrected by 35% in a year. The study also reports a positive relationship between the two items, both in the short run and long run. Diagnostic tests indicate the model to be fit. The results suggest that, for a primarily oil-producing country like Saudi Arabia, the terms of trade depend on oil prices. The study fills the gap in the literature on the study of terms of trade for Saudi Arabia for the last few years, where there has been a high volatility in oil prices.
This paper investigates the impact of oil price shock on three domestic price indices such as import price index(IPI), producer price index(PPI) and consumer price index(CPI). According to the results of estimated 5-variable VAR model which utilized monthly data from 2000.1 to 2014.7, international oil price does Granger-cause IPI and PPI, but the lags of oil price do not enter into the equation for CPI. The accumulated impulse response analysis shows that the responses of one standard deviation shock of oil price result in 1.435%, 0.319% and 0.107% increases in import, producer and consumer price index after three years, respectively. The results of variance decomposition indicate that the influence of oil price to producer price index is much bigger than the import and consumer price indices.