Oil prices across the globe are characterized by major swings and fluctuations, which have attracted considerable attention from scholars, policymakers, and practitioners. The increased attention in oil prices are attributable to the fact that they have significant impacts on the global economy. Based on academic literature, oil prices fluctuate for various reasons including supply disruptions, changes in global demand, and precautionary intentions. For instance, in the aftermath of the 2008 global economic recession, oil prices fell because of an overall decline in global demand (Lee & Huh, 2017). Fluctuations in oil prices have been evident since 2012 to the end of 2016 because of various factors that contribute to changes in these prices. Despite these various factors, there are several measures that are utilized to predict oil prices in the future. This paper discusses the reasons for changing oil prices, oil price fluctuations between 2012 and 2016, and prediction of oil prices for the next five years.
Reasons for Changing Oil Prices
As previously mentioned, oil prices have been characterized by major swings and fluctuations, which have received considerable attention because of their potential effect on the state of the global economy. According to Caldara, Cavallo & Iacoviello (2016), a decline in oil prices despite of whether its caused by supply or demand factors depresses economic activities worldwide, especially in emerging economies. Policymakers, practitioners, and scholars have continued to examine factors that contribute to fluctuations in oil prices. These attempts have been geared towards understanding oil price fluctuations and making predictions on future prices of oil in order to promote growth in the global economy. The existing academic literature highlights several reasons that contribute to changing oil prices including changes in global demand, precautionary intentions, and supply disruptions (Caldara, Cavallo & Iacoviello, 2016). The changes in global demand, which in turn contribute to major swings in oil prices, are fueled by different economic factors. For instance, in 2008, the world experienced a global economic recession, which contributed to an overall decline in demand that in turn resulted in decline in oil prices. According to Lee & Huh (2017), oil prices during this period fell and started to increase in early 2009 after the impacts...
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