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Example research essay topic: Crude Oil Productivity Growth - 673 words

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The upward revision to US gross domestic product (GDP) indicated that the economy is set for a period of rapid growth. Economists are now expecting the economy to reach annual growth rates of 4 % or more in the second half of the year. Among the factors driving growth was spending on home construction, which grew at an annual rate of 6. 6 %. According to 30 forecasters surveyed by the Federal Reserve Bank of Philadelphia, the prospects for economic growth over the next two years look about the same now as they did three months ago. The forecasters expect real GDP to grow at an annual rate of 3. 5 percent in the current quarter, not much different from their previous forecast of 3. 4 percent. For the year, growth is expected to average 2. 3 percent, up just a bit from the previous estimate of 2. 2 percent.

Growth is expected to accelerate to 3. 7 percent in 2004. 1 Such economic growth will positively influence on air transportation as whole, as the consumer purchasing ability and business transportation needs will increase. There are other economic factors, which will influence the development of air transportation business since the later economic problems and force-major events taking place some time ago. As the tensions with Iraq increased early in 2003, uncertainties surrounding a possible war contributed to a softening in economic activity. Oil prices moved up close to $ 40 a barrel in February, stock prices tested their lows of last fall, and consumer and business confidence ebbed. On balance, over the following three months as a fuel price surge drained consumer purchasing power and severe winter weather kept many shoppers at home.

Businesses, too, were reluctant to initiate new projects in such a highly uncertain environment. Hiring slumped, capital spending plans were put on hold, and inventories were held to very lean levels. Collectively, households and businesses hesitated to make decisions, pending news about the timing, success, and cost of military action -- factors that could significantly alter the outcomes of those decisions. 2 The start of the war and its early successes, especially the safeguarding of the Iraqi oilfields, were greeted positively by financial and commodities markets. Stock prices rallied, risk spreads narrowed, oil prices dropped sharply. The quick conclusion of the conflict subsequently added to financial gains, which are favorable for air transportation services with lower fuel costs and high consumer demand. The recent declines in energy prices are another positive factor in the economic outlook for the transportation business.

The price of West Texas intermediate crude oil dropped back to below $ 26 per barrel by the end of April, but as indications of a delay in the restoration of Iraqi oil exports became evident and geopolitical risks crept back in, prices have risen to near $ 30 a barrel -- a worrisome trend if continued. Nonetheless, the price of crude oil is still about $ 10 per barrel below its peak in February. This decline has already shown through to the price of gasoline in May. (2). The years from 2000 were a mirror image of the forecasting experience of the late 1970 s.

Partly because forecasters underestimated the trend rate of productivity growth since 1996, they under predicted the economy's growth rate and over predicted inflation. To be sure, as the economy continued to outperform expectations, analysts put more effort into investigating the possible causes of the increase in productivity growth. As it was noted, energy prices already are reacting to the decline in crude oil prices, and core consumer price inflation has been minimal. 3 Inflation is now sufficiently low that it no longer appears to be much of a factor in the economic calculations of households and businesses. In recent months, inflation has dropped to very low levels, strengthening dollar exchange rate expectations. All these factors appear to be cornerstones in fostering substantial development of airline service business for at least a year ahead, as far as unexpected macroeconomic factors do not bring their changes.


Free research essays on topics related to: crude oil, productivity growth, oil prices, air transportation, economic growth

Research essay sample on Crude Oil Productivity Growth

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