Effects of Crude Oil Prices

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Executive Summary What affect does the price of oil and gas have on the economy? How does this affect the daily lives of the entire population? The preceding questions are the basis for the enclosed report. The primary objective of this report is to give a few reasons as to what causes prices of oil and prices of gas to rise. Among these reasons, speculation of things that may or may not happen, like a terrorist strike, is one of the leading factors. Another reason for the continued rise in prices of oil and gas is the constant growth that China is experiencing in population and energy consumption. While each of these natural resources is often spoken of in conjunction with one another, they are very different commodities with different market drivers and uses within the economy. Supply and demand play an important role in each of the resources, but there are a myriad of other factors as well, from speculation, transportation, permitting constraints, and environmental concerns. Crude oil is highly subject to speculation, but is also greatly affected by growing demand in developing countries. The most notable new mass consumer is China, with a population of over one billion people and a demand profile that is rapidly increasing to place a strain on oil supply in the world market. China has the capacity to require more oil supply than the rest of the world combined. Natural gas is another story. For the most part the U.S. produces most of what it consumes. This is because transportation of natural gas from a non-domestic location is an expensive and dangerous process that is met with resistance; however, it is almost exclusively supply and demand that drives the price of natural gas.
EFFECT OF CRUDE OIL AND NATURAL GAS PRICES
Introduction
Oil and natural gas are natural resources that consumers use every day. Oil is used to make many of the products used from plastics and pharmaceuticals to gasoline and heating. Natural gas is used



Cited: "A Hungry Dragon." Economist. 8395 (2004): 2pgs. 22 Apr. 2005 . American Petroleum Institute. 2004. American Petroleum Institute. 15 Apr. 2005. < http://api-ec.api.org/newsplashpage/index.cfm>. Benjamin, Matthew. "Running on Black Gold." U.S. News & World Report. 1 (2005): 2pgs. 18 Apr. 2005 . Brown, Stephen Energy Information Administration. 3 Mar. 2005. Energy Information Administration, EI 30. 15 Apr. 2005. . Samuelson, Robert J. "The Dawn of a New Oil Era." Newsweek. 14 (2005): 1pgs. 18 Apr. 2005 . Stern, Linda

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