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下面为大家整理一篇优秀的assignment代写范文- The rapid drop in the world price of oil: is this good or bad for Canada，供大家参考学习，这篇论文讨论了世界油价下降对加拿大的影响。自2014年末起，国际油价一直都在下降，对加拿大的影响非常大。国际油价下降，使得加拿大不得不以较低的价格出售石油，这对加拿大石油公司是一个非常大的打击，而且也会造成加拿大经济的不稳定。一旦企业不能获得足够的利润，那么他们可能就会解雇员工。

The decline in oil prices ever since late 2014 that has persisted until now is expected to result in changes in other macroeconomic condition. Since the world economy functions as a whole, whether the decline in oil prices will be a good thing or a bad thing for Canada depends on which perspective you are taking, which group of people are affected and whether you are looking at this problem from the short term or the long term. While many people believe that overall, a drop in the oil price is a positive thing, I believe that the rapid drop in the world price of oil does more harm than good to the economy in Canada and the world as a whole. This paper will analyze the problem from the household’s perspective, the corporate perspective, the government’s perspective, and macroeconomic impacts.

First, the reason why some people may say that the sudden drop in price is a good thing is that people pay less money for the same tank of oil that they use on their cars. From the household’s perspective, I agree that this is a good aspect because families with cars are certainly going to save some money. However, from the perspective of oil station owners, such as Suncor, Imperial Oil, and Talisman, this is a terrible news because they will be showing loses on their income statement. Their balance sheet will also look devastating because they had purchased the crude oil at a high price in the past, resulting in high accounts payables and high inventory levels. However, they are forced to sell the oil at a lower price now that the world oil price decreases, resulting in low accounts receivables and net income. Not only Canada, but owners of oil station in the majority of countries in the world will suffer from this problem. Maybe if Canada protects its state-owned firms the way that China did, then the loss for oil firms will not be such a huge issue. However, in such a capitalized country where the demand and supply shape the market price, it is unlikely that the Canadian government will subsidize the oil industry in such a high degree that can rival that of China. The resulting decrease in consumption will have a negative impact on the Canadian GDP.

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Second, the decline in oil will truly create uncertainties and turbulence in the Canadian and world economy. From the perspective of the corporate world, the speed and magnitude of the oil price decline has the potential to trigger financial strains, which could reduce the global benefits of lower oil prices, although the effect have so far be uncertain. The fact that the drop in price is so sudden caught many people off guard, including traders in the market and other investment firms, hedge funds who depend on trading commodities to make money. The losses in those related firms will also have a negative impact on the Canadian economy. From the government and policy maker’s perspective, they have to come up with policies to tackle this problem. This is not easy because there are many aspects that they have to consider, including terms of trade impact, fiscal and external vulnerabilities, domestic cyclical position and persistence of the shock. Even if they are able to come up with a perfect policy to solve the problem and cease the declining economy, policies have a lagging effect. It will take months for a certain policy to become effective and the speed decrease cannot wait for several months. From a perspective of looking into the future, the oil price outlook is highly uncertain, but a substantial part of the oil price decline is expected to persist in to the medium term, as forecasted by Standard & Poor analysts. However, over the most recent several years, we have seen that even professionals’ forecasts may not be accurate. Just like how the housing market in the US declined to a level that is lower than most professionals predicted, this time, oil price reduction is hard to say what the lowest level will be. Even though institutions such as the IMF are all developing supply-demand models to predict oil price, future price uncertainties will decrease consumer confidence. If traders expect the price to decrease, then they may short oil related financial derivative securities and cause the price to drop even further, creating a negative cycle.

Last, but not least, the world economy functions as a whole unit and one unit, such has oil, will impact other industries and other macroeconomic factors. Employment level will definitely be negatively affected because once firms cannot generate enough profit, they fire people and hire less. By January 2015, the country’s labor participation rate had dropped to a 13-year low level of 65.9%.  A drop in labor participation rate and an increase in the unemployment rate is not a good sign for the Canadian economy because labor is an important factor in the production function. Without sufficient people working, the output in firms will decline and the satisfaction rate of residents will decrease if they become unemployed for such a long time. Being an energy exporting country, Canada has many works related to shale drilling. Once oil price drops, shale drillers are having trouble repaying their loans. Higher default rates can hinder the business of banks and the credit history of individuals. While some argue that defaulting and bad debts in one sector is not enough to impact the overall economy, look at the mortgage backed collaterals and how that massive default brought an international level of financial crisis in 2008. In terms of international exports and imports, Canada exports more oil to the US than it imports from Northern Europe.  Once the oil price falls, this means that the oil section in the net exports component of the GDP will decrease, which causes negative impacts on the Canadian GDP.

In conclusion, a sudden drop in oil price is a complicated problem to solve because different stakeholders have different interests. While it is beneficial for household consumers, the drop in oil price creates much more problems in other places that outrun the benefits in the consumers. Corporates, whether doing business related to oil or not and policy makers will all be troubled. Form the macroeconomic perspective, unemployment, national debt level and international trade will be affected negatively. In short, oil price drop in Canada creates turbulence in the economy.

References

Grand, T. “Canada’s job market not immune to oil price shock, Poloz says.” The Globe and Mail, Jan. 22, 2015

Pash, C. “Standard & Poor’s : Oil and gas companies are skidding towards a ratings downgrade.” Business Insider, Jan. 27, 2015

Tverberg, G. “Ten Reasons Why a severe drop in oil prices is a problem.” Our Finite World, Dec. 7, 2014

US Energy Information Administration, Petroleum and other liquids. Company Level Imports. Feb. 29, 2016. http://www.eia.gov/petroleum/imports/companylevel/

Wang, Y. and Lu, JZ. “The Challenges and Opportunities in Canadian Oil and Gas Investment under Low Oil Prices.” International Oil Economy, 2015(10).

Zhang, HF., Kong XL. and Tian Y. “The Prospect of Oil Sands Development Environment of Low Oil Prices in Canada.” China Petroleum and Chemical Industry, 2015 (3):73-76

Zhang, K. and Lu, QJ. “The Root Cause and Influence of Oil Prices Decrease.” Chinese and Foreign Energy, 2015, 20(5).

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