The Price Of Oil Prices

The reason of the fall in oil prices are the constant change of demand. The need for the oil is actually stagnant. Crude oil is becoming a product of the past. Today, you can harvest energy from solar, wind, water, heat, and waves. According to The Economist, “The use of fossil fuels in the rich world is mostly falling. Emerging economies are not currently taking up the slack”.

The consumption of the oil cause changes in the supply and demand. The United States produces 11 million barrels of oil every day. We are one of the biggest countries to have a big influence on the production and prices of the oil. The basic supply and demand theory explains that the if a product is produced more, the cheaper it should sell. If a country were to double the output of oil day, prices would fall and the Production is high, but the distribution of oil isn’t keeping up with the market. The United States builds an average of one oil refinery per 10 years. This is a net loss due to the fact construction has slowed down since 1970s. Since 1970s, the United States has 8 less oil refineries today. The reason why we are not oversupplied with cheap oil is because of the other countries’ higher net margin and the only operate at 62% of their capacity. Excess capacity is only there to meet future demand. With demand moving accordingly, oil prices will continue to be set mostly by the market — despite external players’ best efforts. (McFarlane)

The consensus from the 1970s and 1980s was that there was an inverse relationship between oil prices and real economic activities. This belief later changed when the oil price crash of the mid-1980s failed to boost economic growth. Researchers then believed that increasing oil prices negatively affect the economy whereas falling oil prices have very little impact and by the 1990s this impact was assumed to be minimal (DePratto, de Resende and Maier 2009). More recently, researchers have found that increases in the oil prices adversely affect the economy whereas the impact of a decline in oil prices on GDP growth is only negligible (Jimenez-Rodriguez and Sanchez

Recently the price for the Canadian had drop drastically from. This was possibly due to the oil crash that occurred in Alberta. Due to the large supply of oil in the Middle East, the price of oil has dropped drastically, which meant that the price of oil in Alberta also dropped. Although the price of oil has lingered about $35-40 a barrel, the break even price is $70 a barrel. The oil crash that occurred in Alberta has brought grim news as unemployment in Alberta has increased drastically.

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)

During the past three weeks I have been reading a book called The Prize, by Daniel Yergin. I decided to read this book because it traces the history of the oil and gas business dating back to the mid eighteen hundreds up to recent times. This book is important because oil production is one of the biggest economic issues around today. The Prize explains the fluctuations in the oil business beginning with Edward Drake 's first successful oil well in Pennsylvania, followed by Teddy Roosevelt 's anti-monopoly case against Standard Oil and finishes with the development of the oil industry in Saudi Arabia.

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.

This report will consist of the causes and consequences of the changing price of WTI crude oil and recent trends in the global price of oil. It will also include the effects of the ever-changing price of oil on individuals, business firms, governments and the economy.

The two main points in Cavaney’s argument for global oil production peaking while still in high demand being a myth are, primarily, that there are still plenty of reserves and that technological advances will extend those reserves further and, secondarily, that society will advance beyond the need before the resource will run out. Cavaney points toward policies, such as price controls and synthetic fuel subsidies, put into place in the 1970s to avoid disaster from oil production losses as pricey government mistakes. The alarm was sounded, yet production continued. Funds were spent inefficiently. Replacements will develop over time and advances will keep the current supply flowing.

The growing oil scarcity in the early 21st Century and its possible implications on the global economy, including economic growth, inflation, food security and poverty, is a subject that has been widely well known and discussed by a plethora of scientists and economists. Peak oil, a term coined by M. King Hubbert in 1965, is generally defined as “the time in our history when world oil production will reach its all-time peak and begin to incline forever”(Hirsch et al., 2005). By their finite nature, there is no argument over whether fossil fuels – oil, gas and coal – will go scarce, but rather when this will occur, whether alternative energy supplies will meet the ever-increasing demand, and how best to oversee such a transition. The failure to do so could result in a profound word-wide economic crisis leading to lower economic standards in developed and developing countries alike. Cuba, one of the only countries that has faced such a crisis yet, is an example of options and hope.

the Arab members of OPEC had the drop in production that resulted world production to drop by 7.8% between September and November of 1973. Also, an exogenous oil price shock can be explained by studying the component of oil price increase that happened as a result of the Arab production cutbacks in 1973 and 1974. The third event the Iranian revolution occurred in November 1978. Iran had oil production of 6.1 million barrels a day in September 1978, but in January 1979, it was 6.1 million barrels a day; consequently, the drop caused total world oil production to decline by 8.9%. The fourth event was Iran-Iraq War.

In this text, I concern myself with the contents of two articles based on recent microeconomics issues. During the last two months, the price of gas in the U.S. has been on an upward trend. Taking into consideration recent happenings on the international scene, this trend could have been triggered by many different factors. The articles I make use of in this case discuss the rising oil and gas prices.

Orlov proposed that the financial crash, hitting in 2008, may have been directly related to the oil catastrophe. He explained the economy was at an unmanageable rate in regards to oil and production. Oil is a very important resource and is used for a majority of everyday tasks. Oil helps operate items such as automobiles and other machinery. When oil price increases, it becomes too costly for citizens to operate daily tasks; however, when oil prices decline it shows our economy is overall financially capable of purchasing more goods and services. It would be beneficial to prepare for the possibility of having no more oil because we are steadily using it at an abundant

Currently the price for a barrel of oil is around 33 American dollars. However, around 2010 the price of a barrel was approaching 150 American dollars, which caused the drivers of crude oil to lose money. In addition, everyone had to pay more for gasoline, but now it has become a more reasonable price. In Michigan, the company named Atlas began to struggle when gasoline prices reached an all-time high with their employees. The employees typically were paid by how many loads they were able to drop into the ground. Due to the gasoline prices being so high, the drivers were losing money every week because no one was purchasing the gasoline. Therefore, many employees that had been with the company for several years started to leave and go with

The lack of correlation between oil prices and scarcity could be a result of technological advancements, if despite a fall in price price the price minus marginal cost is rising, the scarcity rent paid to the producer would also be increasing inline with Hotellings theory. Alternatively newly discovered resources may decrease scarcity rent, as a result of a shift in the time until resources deplete. In 2013 consumption cover of oil was estimated at 55 years this increased from 30 years in 1980, this increase in consumption cover contributed to the decline in oil prices as past fears of scarcity dissipated. However this has been a gradual feature developing over several decades and therefore does not fully explain the sharp decrease in prices seen after 2014. Hotellings theory may not be holding because future supply prospects are still sufficiently strong and the estimated date at which scarcity would occur is so far in the future that scarcity rent is negligible compared to the costs of extraction. In conclusion over the long run, historical data suggest that scarcity has had little impact on oil prices though as the threat of scarcity approaches it could become a more prominent feature.