Sample Essay

Most of the global economies are oil importers, with most of the oil imports originating from theMiddle East. The increasing oil prices represented a scenario where the negative terms of trade precipitated a recession, coupled with the failure in the policy implementation in theUS.

 At the back drop of the mortgage lending bubble, theUSwas facing a crisis in the form of a significantly negative balance of trade, thereby eroding the availability of credit. The negative situation with regard to the disposable income in the major oil importing nations and blocks, including the Euro zone,Japan,China, and theUSdiminished the ability of the globe to react to the reduction in credit, thereby king it impossible for the most developed economies to react to the crisis.

                TheMiddle Eastwas treated to a significant inflow of cash and revenues from the rising oil prices owing to increasing oil prices at a stagnant demand. However, with the biting recession, oil prices came crashing and dropped to $30 per barrel, thereby draining the benefits which had accrued to the region. The political instability in the region compounded the fluctuations in the price of oil and related products. Increasing tension inIraqas well as the stand-off inIsraeland its neighbors has contributed to the frequency of spikes in oil prices precipitating the need for investment in oil futures and contracts. As indicated on appendix 9, the reduction in consumer confidence and the unpredictability in oil prices have contributed to reduction in the real incomes of the individuals and investors who rely on returns from the energy sector. 

 

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