Effects Of The Oil Prices On The Economy

Discuss how rising oil prices might affect the macroeconomic performance of an economy. (25 marks)

The oil age has become an age of inequality. The discovery of oil has brought the wealth of a few people, and has brought misery to most people. Many oil rich countries suffer from the distortion of the economic development, the financial instability, the increasing gap between the rich and the poor, the serious

Over many decades oil has supplied the global market with a realatively inexpensive method to provide energy and countless products. Without oil the world would not be as well developed as it is today. Large countries such as the USA and China thrive off oil and without it would come to abrubt halt. [1]

The crude oil industry has become prominent since mid 19th century. Ever since the Industrial Revolution, the development of drilling methods has brought oil into a drastically larger extent of mass production. Petroleum is one of the important extracted compositions of crude oil in the U.S. Until today, it is globally used mainly as fuels in transportation. Other uses include heating homes, powering industry, and providing raw material for plastic manufacturing. The great importance of oil to the country has led to the exploitation of its resources in the past century. Not only exploiting land resources, the government

This paper will observe the relationship between UK economic indicators and global commodity prices. The paper will be divided into seven parts. Part one will be the introduction, part 2 will be the literature review, part 3 will be econometric models and methodology, part 4 will be data summary, part 5 will be results and analysis, part 6 issues/extensions of the econometrics modelling, part 7 will be the conclusion and the references.

Food prices and the prices of other materials will also increase as a result of peak oil, which is another economic impact. This is because all countries rely on imports of food or other materials. For example, more than 80% of the imports to America are goods and industrial equipment ($2.268 trillion) and the smallest import category is food ($115 billion). These rates will be affected due to peak oil because most of these imports are either shipped, or are received by transportation, which runs on oil as a fuel. When peak oil is reached, ships and other methods of transportation would not have enough fuel to run on which therefore results in countries not receiving materials they need. This issue greatly affects low-income countries such

"As we all know, the economy has been going up and down in recent years. Gas prices, prices on goods, and real estate have all depreciated as a direct result of the struggle within the economy. My cousin currently works for Helix Energy Solutions. She has truly seen it all in the oil industry. With her working in the industry for about twenty years, I have been able to have a better understanding of gas prices and the economy.

In our recent history, oil has been the driver of the global economy. The advance of modern industrial civilizations was facilitated by cheap and abundant energy in form of fossil fuels. At present, oil accounts for about 40% of the primary energy source and natural gas contributes 23%. This statistic shows how much the world is dependent on oil. The dependence on oil is majorly in the industrial, transportation, and agricultural sectors. The use of oil as a fuel source is seen to have increased by around 50% over the last century. The energy needs have been observed in the daily activities of industry, private life, and commerce.

Is it true what experts say, when the price of oil drops the economy gets better, and when the price of oil rises the economy suffers? Of course as consumers we love to pay less at the gas pumps, but as we play much less now for gas then we did last year many of us are suffering due to the dramatic drop in the price of oil. As I strongly agree that the low cost of oil is hurting the economy in general, as I was one who fell victim to the recession working for an oil company up until January 2015, but fell victim to lay off due to the big drop in prices.

Although the lingering effects of the Great Recession of 2007-2009 continue to dissipate and economic growth resumes, volatile global oil prices remain a source of concern for economists and consumers alike. While the experts debate the precise date at which peak oil will be reached and the search for alternative energy sources has assumed new importance and relevance, it is clear that the world's commercial infrastructure will depend on fossil fuels well into the foreseeable future. Indeed, some authorities caution that unless drastic steps are taken today, the world will deplete its fossil fuel resources long before commercially viable alternatives become available. In this environment, determining how surging oil prices affect the U.S. economy represents a timely and valuable enterprise. To this end, this paper provides a review of the relevant peer-reviewed and scholarly literature to determine the impact of surging oil prices on the U.S. economy, followed by a summary of the research and important findings in the conclusion.

Oil is a huge part of everyone’s everyday life. From transportation to heating homes and businesses, oil prices are always dramatically changing due to the constant change of supply and demand. The economic impact that the price of oil has on the U.S economy continues to rise and fall due to political instability. Americans especially have a heavy reliance on oil, especially on foreign origins. The increasing price of oil has spiked large concerns and has become a major global debate. Many sources of oil are in economically and politically unstable regions and countries like former Soviet Union, the Middle East, and Africa. Not only is oil affected by this instability, prices are also determined by natural disasters and political issues. Due to an increase in demand, oil prices in 2011 increase instability due to more instability in oil producing countries like Saudi Arabia because of conflicts and uncertainty. The oil industry is one of the Commanding Heights of the global economy and therefore should not be regulated. It is a global commodity and is the most efficient method of allocation through the free market.

Since 2014 crude oil prices fell dramatically by 50% to around $50 US a barrel. This significant price reduction is largely due to a global oversupply of oil and to a lesser degree a reduced demand for oil.

From the development of the Industrial Revolution to the Information Age we live in today our civilization has been able to progress with the help of the Industrial Revolution’s basic necessity known as petroleum. This resource is so valuable that it has been the reason of 6 global conflicts and the creation of a trillion dollar industry. James Buchan a Financial Times correspondent stated, “A century ago, petroleum - what we call oil - was just an obscure commodity; today it is almost as vital to human existence as water.” The uses petroleum have are relevant from transportation to everyday synthetic materials. It is the sole reasoning

The oil embargo effects ranged from price control/ rationing, reduction in demand and led to the search for alternative energy sources. The immediate economic effects of the oil embargo were felt internationally. OPEC started to accumulate vast amounts of wealth due to the price increase of oil, while the United States, Great Britain, Canada, Japan and the Netherlands were hurt economically. The embargo had a negative influence on the US economy by causing immediate demands to address the threats to U.S. energy security (Ikenberry, 1986). The embargo was also followed by inflationary and deflationary periods within the U.S. During the oil embargo countries began to start rationing and in 1973 gas station lines were worse than the threat of thermonuclear war. Odd policies were being implemented like if your license plate ended with an odd number then you could get gas on an odd day of the month and the same vas inversely true for license plates ending with an even number. Some gas stations even carried signs as shown in appendix 2 of the availability of gas and the signs stated if they were selling to the public or for commercial use only. Another conservation measure that was implemented was the famous national speed limit of 55 mph on all highways. During this time advertisement was mainly centered around conserving energy and the search for alternative energy resources. The energy crisis thus steered interest into nuclear power, domestic fossil

Since the past few decades, owning a car has become a necessity in order to commute from one place to another. However, cars do not work automatically, they require fuel. Since the past decade, the petroleum industry has become one of the leading industries impacting the nation’s economy. Oil has become an essential commodity as it is utilized in transportation vehicles, serves as a raw material for manufacturing plastics, and is utilized in homes for cooking. America’s economy is greatly dependent on petroleum as it is the “black gold” of the nation. The considerable significance of oil has led to the drilling of it, which is not only limited to land, but also the oceans. Offshore drilling is a method in which petroleum is extracted from underneath the seabed. It is one of the significant technological advancements in the past few decades. However, the ones who are involved in the process of offshore oil production are humans, and humans tend to make mistakes. In 1969, due to a human error, an oil spill occurred and natural gas, oil, and mud shot up the well and oozed into the ocean (“Offshore Drilling”). The oil spilled led to an environmental disaster which killed thousands of marine animals and distorted the environment. In order to prevent the same error, the government passed a moratorium in 1981, banning more than 85 percent of the country’s oil drilling sites (“Offshore Drilling”). The moratorium restricted the United States to mass-produce its natural resource.