40 year's experience of oil price fluctuations: Importance and Consequences

It has been forty years since the oil crisis of 1973/74. This crisis has been one of the defining economic events of the 1970s and has shaped how many economists think about oil price shocks. In recent years, a large literature on the economic determinants of oil price fluctuations has emerged. Drawing on this literature, we first provide an overview of the causes of all major oil price fluctuations between 1973 and 2014. We then discuss why oil price fluctuations remain difficult to predict, despite economists’ improved understanding of oil markets. We document that, in practice, policymakers, financial market participants and economists may have different oil price expectations, and that, what may be surprising to some, need not be equally surprising to others. Finally, six main factors is documented about the outlook of oil price which not only will oil prices rise but also to take more dramatic downward trend.