Crude oil is a fossil fuel that can be converted to various forms as highly-efficient and useful products—one of the very reasons oil companies are a staple in most investment portfolios, including offshore mutual funds. Most experts say that the discovery of this non-renewable energy source has literally and figuratively fueled technologies and economies around the world – and the mere fluctuation of this material’s prices can make or break global economics.
Generally, the increase in oil prices can also create a corresponding increase in inflation and at the same time, dramatically reduce global economic growth. An increase in this product’s prices on a global scale can affect everyone: manufacturers, companies in every industry, and even ordinary citizens who rely on hundreds of petroleum products in their day to day operations and activities.
Economists and several other experts know very well of the power of oil and how it can either drive even the most powerful nations into recessions or can easily cause regimes to collapse. It’s important that any subtle change in oil prices must be closely analyzed, and events that can cause a disruption in the oil market may correspond to changes in the economic performance of the affected nations.
One perfect example of how changes in the oil prices can cause a major impact on a global scale is during the Iranian revolution and the following Iraq-Iran war in 1979-1980. The anticipated shortage in oil supply and the resulting price shocks greatly affected the GDP of major economies, more specifically the U.S. This event triggered the American recession – eventually spreading the aftermath on other smaller economies that largely rely on the nation’s stability.