Oil prices fluctuated dramatically in 1973, in the mid-1980s, and between 2008 and 2018. Focusing on these three periods, explain how and why oil prices have changed. Then, discuss how such fluctuations affect world economic stability, using examples in your discussion.

Question

What will be an ideal response?

Answer 1

The ideal answer should include:
1. Explain the fluctuation in 1973. For example, in 1973, during an Arab-Israeli war, the oil-producing Arab states of the region punished the United States for supporting Israel by cutting off oil exports to the United States and curtailing their overall exports, which dramatically increased world oil prices.
2. Explain the fluctuation in the mid-1980s. For example, the Middle East was rapidly losing its market share of world trade in oil as non-OPEC states expanded their oil production. At the same time, industrialized economies learned to be more energy efficient. With supply up and demand down, oil prices dropped in the late 1980s to historic lows of less than $20 a barrel.
3. Explain the period since 2008. For instance, oil prices shot up to $140 a barrel in 2008, but the global recession of 2008-2009 eventually pushed prices lower, and between 2015 and 2018, oil prices remained relatively low. Lower prices were a result of high productivity among OPEC countries (especially Saudi Arabia) and growing oil production in the United States, which was the world's largest oil producer in 2017.
4. State that such fluctuations undermine world economic stability. Students might argue, for example, that when oil prices drop, exporting countries suddenly find themselves cash poor, which has recently contributed to economic instability in Russia and Iran, for instance.
5. Provide a succinct summary and effective conclusion.