Oil And It 's Interaction With The Economy

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

The United States has been involved in the affairs of the Middle East for decades and they’ve had various reasons for being there, whether it was to wage war or to prevent outside influence that would undermine their own influence in the region, it always seemed to revolve around one thing: oil. As we all know, oil is a very profitable resource and it’s a huge part of many nations’ economies and because this is the case many wars are fought over this black liquid. The U.S. is no different in that they did just about anything to maintain their access to Middle East oil. As a result, United States actions in the Middle East today has been formed through the decades long desire for their oil.

The distribution of natural resources like oil and gas are unevenly distributed across the world (Stutz, 2007). This essay will explain where the majority of oil and gas is located. Thereafter, the focus will be on the benefits and drawbacks of countries that are dependent on oil/gas. Finally, a conclusion will be given which sums up the most important factors.

According to Domm (2013), the author of the first article, apart from the unrest in Egypt, several other factors such as a plunge in the inventories of domestic crude oil could drive up demand and in the end trigger an increase in the price of gas. In the opinion of the author, although the problems facing Egypt (and Libya) have affected supply

Oil has repeatedly been referred to as any economy’s lifeblood. Whereas this is an overemphasis, oil has been the utmost key, nonhuman resource of economy throughout the largest part of the 20th century. In the book “The Prize: The Epic Quest for Oil, Money, And Power” by Daniel Yergin, the author illustrates the political, societal, economic, and geo-strategic prominence of this product. The book was published by Simon and Schuster in 2011 in New York, and contains 928 pages, as its ISBN is 1439134839. This research paper aims to provide a book review on Daniel Yergin’s “The Prize.”

When OAPEC cut oil production, the price of oil per barrel increased because America could not increase supply. Later in 1979, the Iranian revolution triggered another oil crisis and this time, the global price of oil tripled. The result of this increase in oil was a “demand and pull” inflation where the level of spending was in excess of what the country could actually produce without needing more expensive resources (Bryan, 2013). Daniel Sargent, the author of A Superpower Transformed: The Remaking of American Foreign Relations in the 1970s, notes that these oil shocks were not temporary aberrations but rather they resulted from economic changes and geological realities. The author explained that as newly independent third world oil producers had gained enough confidence to renegotiate contracts with western oil companies so they could accrue higher profits.

The oil-rich Bolivarian Republic of Venezuela, located on the northern coast of South America, was for many decades considered among the wealthiest nations in the entire continent. While having the largest proven oil reserves in the world has often proved a tremendous boon for Venezuela, the very black gold that has been the cause of its success has also proven to repeatedly be its kryptonite. Over half of the nation’s Gross Domestic Product stems from petroleum exports – which equates to approximately 95% of total exports. It is really not too hard to imagine what drastic consequences shifts in global oil prices could have on the economy.

The United States is the largest import of oil, which produces over 10 million barrels of oil each day. That a lot of oil that they are producing in my opinion. As the years have passed by we have gotten oil for our foreign country this happen in the Gulf War. We also need oil from other countries so in all reality we have to reserve all the oil that we get and make sure we keep up the rapport that we have with the other countries in order to keep the United States out of finically situations. In all we have to be safe about who we deal with and how we react, because we don’t want to cause any infractions with other people or countries and then have to pay for what we have done. “Even as Saudi Arabia diverges from U.S. foreign policy objectives

Oil is considered as one of the most important chemical substances on earth that have greatly affected our lives. For the past years, countries have been using oil extensively since it has a lot of benefits and many uses. Oil has been used a lot in the past years, whether people were using it for personal uses such as for their cars or transportation companies using it for the sake of their vehicles. There are two types of oil conventional oil and synthetic oil, each type has its different uses. Conventional oil is a mixture of mainly pentanes and heavier hydrocarbons that are extracted from an underground reservoir and liquid at atmospheric pressure and temperature, this allows the oil to flow through a pipeline without processing. Conventional oil can be used for many things, but one of the most important uses is for a vehicle. Synthetic oil is a lubricant made up from chemical compounds which are artificial. Synthetic oil is also used for vehicles. For the past years countries have been using conventional oil extensively and soon the world will have supply shortages of oil which will have many negative effects on our lives. Some of the effects include increased debt defaults, rising interest rates, rising unemployment, disruption of exporting oil, more recession to happen, and drop in market value of bonds.

This research focuses on finding a variety of sources in books, magazines and Internets on the effect of the oil industry on world trade. Its purpose is for finding and analysis the source, which is related to the following issues through Robert Harris?s theory (2007) and CARS theory.

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.

Oil is one of the many natural resources on high demand. To safeguard the oil, countries’ producing it has to take caution in the exploration and the sale of their oil. This explains why some oil producing countries in such as Nigeria has found themselves in the scramble with big states like the U.S and the China, which are competing to get a share of the oil. The rush for the oil has attracted new political and economic forces, giving the petroleum industry a stiff-neck competition. Every state is interested in this rare and natural resource. The oil producing countries also is highly dependent on the oil and cannot, therefore, gamble with the idea of putting their economy booster at risk. Oil-producing countries like Nigeria are left with no option but to take great caution when dealing with new scramble for Africa. Nigeria produces large amounts of oil, enabling it to export 10-12 per cent of the oil to the U.S. Without proper evaluation and calculation of their dealings, they stand to lose miserably on their main source of income. The Middle East has over the past 15 years experienced a crisis as a result of interests in their oil by the U.S.

Because oil is such an important resource worldwide, we must make ourselves able to negotiate without having to lose footing because we cannot produce oil. Oil gives other countries an edge when negotiating with us. Because other countries have oil, they can use that leverage to harm our economy. Foreign oil damages our domestic economy. If a country wants to harm us, all they need to do is flood the market with their oil. This drops the value of our oil and the value of the US dollar. If the United States wants to control the economy of their country and not let foreign countries determine how prosperous the United States will be, we need to gain independence from foreign oil.

In the modern world energy has become very important since it helps drive most industrial as well as home based activities. For more than a hundred years, oil has been used to provide to this vast energy requirements. Oil companies around the world have facilitated the exploration, drilling, refinery and distribution of oil in their defined regions. The industrial part that oil companies play can be considered to be much greater than the domestic role. Oil companies produce diesel, petroleum, liquid petroleum gas and other products which are used to drive industrial machines used in production of various commodities. By this virtue, oil companies become an integral part of an economy (Marcel, Valerie, and John V. Mitchell, 98).

There has been a lot of growing interest and concern on the development of petroleum and its contribution to economic development. The objective of this study is to look into the economic impacts of petroleum on the Nigerian economy by using theoretical, empirical and non-economic components to find out the positive and the negative impacts of petroleum on the growth of the Nigerian economy. Giving possible solutions to policies and the non-economic factors. Empirical evidence samples will cover all the