The Impact of the Oil Crisis on the American Economy
With the current spike in oil prices, many American consumers have asked, 'what is going on?' In order to fully understand the current situation and how it is affecting the economy one must look at a variety of factors including: the history of oil crisis in the United States, causes of the current situation, and possible outcomes for the future. It is only after meticulous research in these topics that one is prepared to answer the question, 'what is the best possible solution to the oil crisis?'
Although many critics have not yet labeled the current oil situation a 'crisis,' there is sufficient evidence that it is becoming more severe and is beginning to reflect oil crisis of the past.
Gasoline Prices: Is $4.00/ Gallon Good or Bad for America?
The world economies experienced a decline in oil and gas prices starting at the end of 2014. Along with the economic repercussions we are now facing in 2016 from the price drop, economic analysts are faced with a question- Is $4.00 a gallon gas good or bad for America? In the past, Americans have had to deal with the effects and financial burden of high gas prices that at times hovered in the upper three-dollar range and even breached four dollars a gallon.
America is dependent on other nations for their ability to create energy. The United States is the world’s largest consumer of oil at 18.49 million barrels of oil per day. And it will continue to be that way for the foreseeable future considering the next largest customer of oil only consumes about 60% of what the U.S. does. This makes the U.S. vulnerable to any instability that may arise in the energy industry. In 2011, the world’s top three oil companies were Saudi Aramco (12%), National Iranian Oil Company (5%), and China National Petroleum Corp (4%). The risk associated with these countries being the top oil producers is twofold. One, they are located half way around the world making it an expensive to transport the product logistically to a desired destination. And two, the U.S. has weak, if not contentious,...
With 82.1 million barrels extracted everyday, it is hard to believe that a resource that the world so heavily relies on will soon be gone (Aleklett, 2012, p.17). This paper will explore the effects of the oil crash on society and how we can address the sustainability and find a solution. In this paper, I will support my opinion that something must be done about the consumption and extraction rates of oil and that we cannot live like this forever. In the first paragraphs, I will compare the negatives and positives of oil to show that there are more negatives than there are positives. This will lead into an examination of what the world will be when oil peaks.
Bayon's first body paragraph illustrates America's economic vulnerability in order to prove the topic of America's dangerous overdependence on oil. We consume more than our domestic oil supply due to being so oil dependent, and as a result the author indicates Washington D.C. is practically forced to do business with hostile countries for oil. This creates economic vulnerability of the United States to oil price spikes and inflation possibilities. In 2008, "The United States imported 4 million barrels of oil daily, or 1.5 billion barrels yearly from "dangerous or unstable" countries at a cost of about $150 billion per year. (www.americanprogress.org)." These oil prices of $150 billion dollars per year can be decreased if hydrogen fuel cells were in greater use. As a result of the laws of supply and demand, the United States will have no power over the increasing prices o...
The terrorist attack on the World Trade Center in 2001 was a devastating day for America’s oil industry. Oil prices skyrocketed and fear was put in America. In his article “Take $10 off the Price of Oil,” Steve Hanke states that from 2001 to 2004 oil prices more than doubled reaching $55 per barrel due to Bush’s order for the government to purchase 700 million barrels of oil that caused prices to rise from storage cost. On top of this, oil prices were high to help preserve the oil supply because the nation was afraid oil imports from the Middle East would come to a halt. The September 11th tragedy was not the only time America suffered with high oil prices. In the 1970s some foreign countries stopped exporting oil, which made America fear an oil shortage if imports stopped. America was and remains too reliant on foreign countries for oil. If America were to suffer through another depression such as the Great Depression, then difficulty to make a descant living would be even more than after the September 11th tragedy.
“Meanwhile, the United States remains the world's largest consumer and importer of oil. This year the United States will import about 60 percent of the oil that it burns, and the U.S. Energy Information Administration expects that foreign dependence will rise to about 70 percent in 2010.” (Victor pg1)
In ancient times Babylonians used oil as mortar, Native Americans used oil as a topical medicine, and, before electricity, oil was used to create light. Mankind has been dependant on oil as a resource for generations. It has influenced growth, warfare, and technological advancement, but what if mankind were to run out (Alois)? The possibility of this eventuality was first vocalized by M. King Hubbert who introduced the notion of “peak oil.” When global oil production “peaks” it reaches its greatest output level and then permanently declines (Hubbert). There is much debate as to whether this “peak” exists, has already been passed, or will be passed in the near future. Despite the debate there is one undeniable fact; there is a finite amount of oil since it is a non renewable resource. Considering a sudden systemic collapse of all oil production seems unlikely, oil will probably be replaced gradually. This loss of oil could be positive; possibly less CO2 would enter the atmosphere and global warming may be stalled. However, the success of this transition away from fossil fuels will be largely dependant on the ability of developed nations to manage their time. If the US, or any other nation, is going to be successful, they need to start now.
What will happen to America no oil coming from other countries? America uses more than one-third of the world’s energy, and “95% of the energy is powered by oil.”(UCSUSA.) However, “Americans are only able to produce one-third of the oil needs,” (NatGeo.) in order to run what the country as it is now. The other two-thirds of the oil needed come from unstable parts of the world such as the Middle East China, and Africa. Without imported oil, America can lose the world power, due to the fact, that America only rely on one source of energy and unable to produce the amount of energy needed without imported oil. Oil surrounds the American way of life such as economically, transportation, heating, and power. However, there is no reason that Americans should rely on one source of energy when people can exploit countless power sources others such as solar power, tide power, hydropower, wind power, nuclear power, batteries, and biofuels.
“Fracking provides a source of energy that is not only new but also relatively clean, cheap, without political strings” (www.economist.com, 2014, para. 3). In the article “The Petrostate of America” the debate about fracking, the energy boom throughout the world, and what decisions the U.S. government along with President Obama should make on deciding to lift the ban on exportation of crude oil and restrictions on getting permits to export natural gas are starting to heat up. There are many topics in the article that focus on key principle and indices of economics and based on the decision made by our leaders could possibly determine our fate in an economy that is trying to rebuild. Therefore, throughout this work the goal is to explain how the following three economic principles, people face trade offs, trade can make everyone better off, and governments can improve market outcomes relate to the petroleum boom in the United States. Once the economic principles are explained defining and identifying Gross Domestic Product (GDP), supply and demand, and Consumer Price Index (CPI) will be the focus, so an educated discussion about the meaning the indices have and how they relate to the article can be accomplished. After defining, explaining, and discussing the relationship an appropriate evaluation and forecast will be made.