Cse Study Analysis Economics Essay Example | Topics and Well Written Essays - 2500 words

Cse Study Analysis Economics - Essay Example Instead the use of oil and gas has kept growing over the years. Though the oil price are now on a declining trend, but in the recent past the world was worried by the way oil prices started marching upward, touching a level of about $130. Events following the mortgage crisis have now led to a fall in oil prices, thus making the OPEC nations sit up and take note. Price of any commodity in general is determined by the law of demand and supply. As per this law, 'all other factors remaining constant, the higher the price of a product, the less number of people will demand it. Or in other words, the higher the price, the lower the quantity demanded.' But if we look at the historical perspective, it is found that oil, the source of energy has also defied this law. The demand for oil continued to increase even when the prices kept increasing. With majority of the share going in favor of Middle-East nations, the oil is not only the source of energy, but in today's global scenario, it has become an important source of political power as well. As pointed out in the case study, US is one of the largest consumer of oil from OPEC nations, therefore the recession hit economy of US has certainly led to an economic downturn all over the globe in varying degrees. But if we take a historical perspective we find that till the early 1970s, the prices of crude oil kept hovering around $15-20. But the huge strength of oil was realized by the oil producing nations in 1973, when they all decided to stop exporting oil to US and other western nations, in retaliation to the US assistance to Israel in the Yom Kippur War1. Oil prices started moving upward all around the globe as it became a much desired commodity in the consumerist society in western nations. Since then the OPEC nations have seen many ups and downs. With leadership positions in oil production, many OPEC members have seen tremendous growth and advancement during the last 2-3 decades. OPEC-SWOT analysis Strengths i. About five decade old organization: OPEC came into being in the year 1960, with Iran, Iraq, Kuwait, Saudi Arabia and Venezuela as the founding members. The stated objectives of the intergovernmental group are to co-ordinate and unify petroleum policies amongst member countries, so that a fair and stable price can be extracted for petroleum products. Later on some more countries joined the group, thus providing the group further strength. The fact that, despite many hiccups during all these years, the group has been able to able to sustain its monopolistic standing and continues to define the oil prices, speaks volumes about its clout in world affairs. ii. Well-knit grouping: Though Ecuador and Gabon had to leave the grouping on account of some differences of opinion, but the rest of the group is still intact all through these years, despite having serious differences amongst some nations like Iran and Iraq, Kuwait and Iraq etc. The group seems to have developed good mutual understanding on protecting the economic interests of the member states. iii. Big say in deciding oil prices all over the world: OPEC certainly has a control in deciding about the oil prices and quantity to be produced in such a manner that while fulfilling the demand for fuel, the member states are also able to command a good price for the product. iv. Membership has a Premium Value attached with it: Though many countries have been