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The Rise in Global Oil Prices a) Explain some of the economic reasons behind the recent rise in global oil prices? The price of oil, being one of the most crucial and demanded commodities in the world, fluctuates significantly not only due to excessive aggregate demand but also to sustained increase in costs. In short, if the global demand for crude oil is increasing and the supplies of the international markets cannot keep up, inflation will result. The effect on the price however is emphasised by the fact that both the demand and supply of oil is price inelastic. In recent months the cyclical demand for oil has increased noticeably following a strong recovery in global GDP growth because oil is a major input into many industries, for example the production of kerosene for cooking and heating. Up and coming market economies like China have had a seriously influential role in the rapid...

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