Economics of War and the Oil Industry: A Look At the Effects of War on Oil Prices
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Authors
Andrus, Leslie
Issue Date
2002
Type
Thesis
Language
en_US
Keywords
Alternative Title
Abstract
The goal of this paper is to prove that war causes increased oil prices that in tum
cause national recessions. To do so, there is an in depth look at war economics including
finance, regulation, taxation, resources, and peacetime preparations. There is also a
discussion on the international oil market and how it is run. This includes the history of
the industry prior to the formation of OPEC ·until the present day, a look at shifts in
control from one group (the international majors) to another (OPEC), how the controls
affect the economy, and how the governments behind OPEC affect the industry. This
however is all just background, literature information that helps to explain and support
the thesis.
The empirical section uses thirty years of data for several different variables. The
variables that are plotted and correlated are gross domestic product, oil prices, and time.
It was found that GDP and oil prices are slightly positively correlated. Hikes in both
GDP and oil prices over time occur either during or directly after a major war or conflict
in the U.S. or the Middle East. A regression was run using change in oil prices as a
function of change in GDP, times of war, and imports of oil into the U.S. by OPEC
countries. The R-squared result tells us that the equation is not very good for forecast
purposes. One could conclude, however, that war and income do affect oil prices but not
to the extent that may have been previously hypothesized.
Description
38 p.
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License
U.S. copyright laws protect this material. Commercial use or distribution of this material is not permitted without prior written permission of the copyright holder.