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) This paper will define terms such as economics, micro economics, the law of supply, the law of demand and the factors which lead to a change in supply and demand. This paper will also summarize the article and explain the basis for the trends in consumption patterns as discussed in the article and describe what occurred to change the demand for crude oil, or the supply of crude oil and market prices of such crude oil. Economics and Microeconomics
An understanding of the basic principles of economics is necessary to understand trends in consumer consumption patterns. “Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political reality of the societies.”(Colander, 2004, p. 4) Economics is a science which deals with the production and distribution of products as well as the consumption of such products. Microeconomics is the branch of economics which deals with items such as “pricing policy of firms, households’ decisions on what to buy, and how markets allocate resources among alternative ends.” (Colander, 2004, p. 14) Specifically, microeconomics focuses on the laws of supply and demand.
Situation Summary of the Article
The article provides a historical summary of consumption patterns of crude oil by providing long-term trends which span from 20 to 50 years, including an analysis of the trends in the consumption, expenditures, imports and prices of...