The Critical Value Of Crude Oil

Senator Everett Dirksen once noted “The oilcan is mightier than the sword”. In today’s world, it is easy to see why oil can be considered the most important resource to hold. Without oil, many of the common day occurrences we take for granted would be impossible. Oil is used for almost everything; from the fuel used to drive our vehicles, to the plastics used in every facet of life, and providing the heat needed to live through the winter. In fact, the United States depends so much on oil that as a nation it uses over 20 million barrels a day. Importing oil increases the total costs because of the need to transport it from around the world. It is estimated

The earth contains many natural resources that humans consume daily in order to satisfy our needs. Each natural resource, once gone, will require us to find an alternative. One of the most used and consumed natural resource on Earth is oil. Oil is needed for heating homes, the generation of electricity, the creation of asphalt on roads, and the production of many chemicals, plastics and synthetics. Additionally, oil is used for transportation purposes. Once oil runs out, how will humans travel across oceans, drive to work, or trade goods from country to country? With the end of conventional oil approaching, humans needs to locate alternative ways to replace oil within transportation of cars and planes in order to satisfy the needs of humans in the future.

The United States consumes more than 25% of the world’s petroleum products which is a large percentage, considering only 3% of the world’s oil reserves are produced by the United States. Given the demand for petroleum products such as gasoline, understanding why Crude oil prices have skyrocketed in recent years, is not hard. According to the article “Ending America’s Oil Addiction,” the surge in crude oil prices can be reduced in large part to the simple concepts of supply and demand. (Cooper, 2008)

The featured article “The End of Oil,” the author, Alex Kuhlman argues that oil production is decreasing due to the costs of production are rising because cheap and easily accessible oil is hard to find despite increased consumption.(Kuhlman, 2007). Kuhlman (2007) provides evidence both from oil demand and supply aspects to illustrate the imbalance which causes the end of oil.

Oil is one of the most valued products in the world—which means oil can be very inelastic. It is something that people need in order for them to keep their cars going and for many other reasons in this world. When the cost of gas drops down, the usual consumer’s response is positive, however, that might not be the case for some producers in the market.

During this period, the price of ‘Brent’ crude oil (like WTI) reached an all time high in July of 145.61 USD/BBL in response to strong economic conditions prior to the Global Financial Crisis hitting in early 2009. The price of ‘Brent’ crude oil also similarly bottomed out in 1970, with a record low of 2.23 USD/BBL and following the GFC, prices sharply fell, with prices at 62.04 USD/BBL as of April 2015. Over the 45-year period, significant events such as the GFC, the Iran/Iraq war, the Iranian revolution and various OPEC cuts (as shown in graph 1) has caused the price of ‘Brent’ crude oil and crude oil as a whole to historically be fairly volatile and as such, these various political and economy-wide factors provide an explanation for volatility in prices over the past 45 years.

After the industrial revolution, the demand for oil has been increasing globally. Over 100 million tonnes of oil are transported around the world on average a day. There are countries like the US which consume almost one quarter of global oil output, which must be supplied from oil reserves, usually from countries like Saudi Arabia (Guinness, 2011, p. 245). This shows that the topic of oil consumption is a global issue as all countries need oil to develop and provide for their populations. The issue with this large consumption of oil is the fact that oil is a non-renewable source of energy and therefore has a limit. Oil is formed

The oil industry, like other industries, has been forced to adjust to the massive change forces of technology, globalization, industry transformations, and entrepreneurial innovations. The oil industry has some special characteristics as well. Oil is a global market with 53% of volume internationally traded. It accounts for about 10% of world trade, more than any other commodity. While the

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.

The United States’ increasing dependence on oil is a growing problem. Oil demand is increasing at an outstanding rate, not only in the U.S. but also around the world. Consider this, in 2008, “the world produced about 85 million barrels of oil a

The world as we know it is heavily dependent on oil as our primary energy source, even though we are in constant search of alternatives. After nearly 100 years of searching for something different, oil remains the most reliable. Oil is used for everything from technology to transportation to food and business, yet it is not in a never-ending supply. This is where the politics come into play. According to the International Energy Agency, oil comprises 31% of the total world energy supply, as of 2013. (Walker, Andrew.) So when the world needs oil as 31% of its energy needs, it is clear how powerful this non-renewable energy source truly is. (Center for Climate and Energy Solutions.) As J. Paul Getty stated, “Formula for success: rise early, work hard, strike oil.”

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.

Nonetheless, the countries that export a lot of oil will attempt to stabilize their economy by reminding the world’s population that they are very dependent on oil for producing electricity, consumer products, and fuel.

Oil is certainly the world 's largest cash commodity. One of the main products produced from crude oil is gasoline. Gas plays a significant role in the life of people in countries throughout the world. Gas accounts for approximately 17% of the energy consumed in the United States and is primarily used for powering automobiles ("A Primer on Gasolne Prices" 5 Oct 2003).

Transportation has been the only growth sector for oil demand over the past twenty ears and will continue to be the principal reason for growing world oil demand in the next twenty years. Among all modes of transportation, highway vehicles continue to dominate transportation energy use and petroleum is the energy source of choice (89).