War Will Affect to Fuel and Car

Topics: Supply and demand, Economic equilibrium, Elasticity Pages: 14 (2912 words) Published: June 11, 2012

According to Wikipedia, fuel is any material that stores energy that can later be extracted to perform mechanical work in a controlled manner. A fuel contains energy, mostly heat, which can be released and then manipulated. Most fuels used by humans undergo combustion, a redox reaction in which a combustible substance releases energy after it ignites and reacts with the oxygen in the air. Other processes used to convert fuel into energy include various other exothermic chemical reactions and nuclear reactions, such as nuclear fission or nuclear fusion. Fuels are also used in the cells of organisms in a process known as cellular respiration, where organic molecules are oxidized to release usable energy. Hydrocarbons are by far the most common source of fuel used by humans, but many other substances, such as radioactive metals, ,are currently used as well.

In economics, fuel is one of the inelastic commodity goods because the world needs so much fuel every day to run and will factually need to pay whatever it costs, or it will cease to run. Yet, once the price for the fuel increase, the consumers were still consume the fuel as the fuel played such an important commodity together with development in economics. Fuel have a lot of functions that would give us plenty of benefit such as, we are using fuel to produce energy and generate the power especially in the industrial sectors, using for transportation, construction, and so on.

When a war breaks out in Country A, which is the main producer for fuel in the world, it causes fuel supply disruptions in the world. Essentially one of the hottest news on global market is oil price fluctuation because the consumer will give their responsiveness immediately as the price of fuel keep increasing day by day. It is because crash in oil market can disrupt stability of any industry. The world’s current energy systems have greatly depended on certain fuel rich regions. For example, two thirds of the world’s crude oil reserves are situated in the Middle East and North Africa. This concentration of scarce resources has already resulted in major world crisis and conflicts, such as the 1970s "oil shock" and the Gulf War in the 1990s.

According to OPEC in http://www.opec.org/opec_web/en/, on October 17 1973, the Organization of the Petroleum Exporting Countries (OPEC) made decision to stop fuel supply to U.S, Japan, and West Europe in order to punish for America’s support of Israel in the Yom Kippur War. Oil price, thus, reached $5.11 per barrel, and $12 in mid 1974. In the U.S, GDP fell 3.2%, unemployment hit 9%, stock exchange lost $97 billion, and FT30 from London stock market was devalued by 73%. Recession and serious inflation had influence to global economy until the 1980s. The 1970s oil crisis really began in 1973. What we see in this crisis is the fact that prices of commodities like oil play a much more vital role in our economy than most think. This also goes to show how much of an effect the Middle East had on life in the United States, as it was Middle Eastern countries that raised the price of oil.

Normally, war has influenced economic history profoundly across time and space. As the supply for fuel was disrupted, several specific economic chain effects will exist such as inflation and also capital depletion. So, the most consistent short term economic effect of war is to push up prices especially the increment price for petrol that will be burden to consumers and consequently reduce the standards of living. When the price of fuel increased, the cost of production for other goods and services also forced to rise as the cost of transportation increased. Since the cost of other goods and services increased, the cost for living also will rise. If the costs of living increased but the income for the consumer remain unchanged, the quality of life for the country will be sinking down. This situation will lead to depression for a...
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