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The Impact of the Oil Crisis on the American Economy

analytical Essay
5564 words
5564 words
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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. The current crude oil price spike began early in 1999 due to a variety of factors. Struggle in the Middle East along with minimal policy changes from the Organization of Petroleum Exporting Countries and the U.S. Government has kept prices high to this very day.

The History of Oil Crisis Within the United States

Before looking at the current oil situation, it is important to understand the times of oil crisis in our country?s past. Through the years between 1970 and 2000, the price of oil has risen and fallen in often-drastic amounts. It is these price fluxuations in crude oil that has caused fuel prices to vary and the economy of the United States to be volatile.

Throughout the past twenty years there have been several drastic changes in oil prices. These dramatic shifts are helpful to look at because of their impact upon the economy and the oil industry. During this time period there are three major shifts in oil price that can be linked to specific events in world history (Miller, 1998). First, the Arab oil embargo of 1973 caused a widespread oil crisis and brought crude oil from three dollars a barrel to a staggering twelve dollars a barrel. Second, the 1979 Iranian revolution caused another crisis that brought crude oil prices to an all time high of thirty-six dollars per barrel. Finally, the third major shift occurred in 1991 due to the Persian Gulf War (Miller, 1998).

Source: The Energy Information Administration (Hakes, 1998).

Oil crisis of 1973

The first large price shift in oil prices came in 1973. The oil crisis of 1973 began in the Mediterranean because of a war. T...

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Miller, W. H. (1998, January 19). Forgotten crisis. Industry Week, 247, Pp. 14.

New Straits Times. (2000, October 5). Demand for electric cars. Pp. 59.

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The Economist. (1999, April 24). Fuel cells hit the road. Pp. 77.

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Williams, J. L. (1999). Oil price history and analysis. [On-Line]. Abstract from: www.wtrg.com/prices.htm.

In this essay, the author

  • Explains that the oil crisis of 1973 began in the mediterranean because of a war, and the yom kippur war resulted from an attack on israel by syria and egypt.
  • Explains that the oil embargo was imposed by the then-powerful cartel, the organization of petroleum exporting countries (opec).
  • Explains how nixon tried to bring peace between the arab states and israel, but the scandals of watergate overshadowed his efforts.
  • Explains that oil prices have been rising at an unprecedented rate, reminiscent of the seventies shocks. these dramatic price increases have both impacted the u.s. and world economies.
  • Explains that oil's recent price fluxuation was caused by opec, the u.s. dependence on foreign oil, and the recent conflicts in the middle east.
  • Explains that with the continued rise of petroleum, the government and other sources have begun to look at possible solutions to this problem. the impact of a virtually doubling in residential home heating costs along with sharply higher gasoline prices has justified drastic measures.
  • Explains the low-income home energy assistance program, originally established in 1981 and reauthorized several times. the program reimburses needy consumers who have responded to higher oil prices and made rational decisions.
  • Analyzes johnson, t., and knight- ridder/tribune business news. amid heating crisis, new jersey residents look for energy alternatives.
  • Analyzes how richardson says proposals to alleviate oil crisis.
  • Analyzes how heating oil prices ride crude rally to record high.
  • Explains that the current oil price spike began in 1999 due to a variety of factors, including the history of oil crisis in the united states, causes, and possible outcomes for the future.
  • Explains that oil prices have fluctuated between 1970 and 2000, causing volatility in the united states' economy. the arab oil embargo of 1973 caused a widespread oil crisis, the 1979 iranian revolution caused another crisis and the persian gulf war.
  • Explains that the oil crisis of 1973 affected motorists, airlines, and the economy. the decline in the u.s. auto industry contributed to the recession.
  • Explains that the oil embargo ended in 1974, but a second oil shock jolted the industrial world in the winter of 1978-1979.
  • Explains that the third major oil crisis in u.s. history began in 1991 as a result of the persian gulf war.
  • Analyzes how opec's increase in production led to a rise in crude prices.
  • Explains that the united states' dependence on imported oil will grow to sixty-six percent by 2020, far higher than the record set in 1998 of fifty percent.
  • Analyzes how the conflict in the middle east is threatening to end the longest-running economic expansion in united states history.
  • Argues that the u.s.'s dependence on foreign oil has a significant impact on the economy.
  • Explains that the strategic petroleum reserve was authorized in 1975 to create a below-ground reserve of crude oil that could be tapped in the event of an interruption in supply.
  • Opines that the proposed reduction in the tax of gasoline, diesel, and kerosene would not cost the government anything.
  • Explains that alaskan oil exports declined from 1.50 million barrels per day to 1.05 mbd, greatly diminishing any west coast production surplus that might have once existed.
  • Opines that the heating oil crisis is in full swing and that a dialogue with the public, industry, and government is needed to solve it.
  • Reports that high gasoline prices in the u.s. have revived interest in electric vehicles, but it would take more than soaring gas prices to move american motorists away from conventionally powered vehicles.
  • Opines that alternative fuel sources are the best solution to the oil crisis.
  • Explains that energy efficiency expands the economy and creates jobs.
  • Compares slavin, b., and sheets, k. on the mideast crisis erupting on two fronts.
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