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This thesis has the purpose to investigate the oil price as the global economic factor but also to examine its implications on the worldwide economy. Thereby the determinants of the oil price are investigated by tackling the oil price itself from three different perspectives – the supply and demand framework, the prevailing world oil market structure as well as from the perspective of already statistically proven oil price determinants. In addition, the arising macroeconomic implications of oil price fluctuations on oil-importing and oil-exporting countries are examined. The investigation based on a thought experiment demonstrates the supply and demand framework to be unable to fully explain all past price changes. The examination on the prevailing market structure identifies the world oil market to be best described as a supply, pure, closed, partial and collusive form of an oligopoly. Analyzing the competitive behavior of the world oil market on three levels identifies non-OPEC producers’ competition to behave in a Cournot manner whereas among OPEC producers Saudi Arabia is identified to be a Stackelberg-follower with certain conditions while at the same time permanently bearing the ambition to become the Stackelberg-leader. The identification on the best describing oligopoly model for the overall industry is inconclusive. Investigating OPEC’s cartel hypothesis does not fully exclude its collusive behavior but denies the OPEC to be described as a prime example of a cartel. The examination of already existing econometric analyses identified a total of 13 determinants to play a key role in the oil price definition process. Investigating the arising macroeconomic implications of oil price fluctuations show oil price changes to be of great importance for the overall economic performance and is best described as a form of a positive of negative vicious circle in which the interconnected second or even third round effects intensify the implications on the macroeconomic activity.
The main goal of this thesis is to examine various factors that determine the price of crude oil. The analysis shows that the interdependency between the crude oil price and the global economic situation has shifted over the past decades. The oil price shocks of the 1970s and 1980s and the behaviour of the oil price throughout the twenty-first century give some indication of the change of this relationship. Furthermore, OPECs market power and the role of supply and demand elasticities are taken into account. Alternative energies, fracking and the behaviour of supply and demand in several market conditions are considered in the determination process of the crude oil price.
In consequence of the prevailing low values of elasticities and the limited number of substitutes in the crude oil market, price rigging and the regulation of oil supply becomes apparent. This yields higher profits for companies and countries acting in this sector, especially for OPEC. Nevertheless, the analysis shows that OPECs market power varies from time to time and is strongly linked to the conditions in the global market. This positive correlation ensures that no oil price increase can be enforced in a period of falling demand. An important role for the determination of the crude oil price can be found in expectations by global demand towards future oil supply. Increasing inventory demand due to tightening oil supply conditions usually result in higher demand for oil, hence higher oil prices. Given the fact that crude oil is a finite resource that cannot be produced endlessly, future price increases are likely. This process can be slowed by the development of alternatives and the possibility to substitute oil. Innovations and improvement of these alternatives can shift demand toward renewable energy sources. In conclusion, there is an upward trend for the future price of crude oil. However, the actual future price of oil will strongly depend on the impact of each factor.