During 1973-74, there was steep rise in the oil price mainly because of fall in the oil output from the Arab nations; the price of Saudi Arabian oil went from $2.59 to $11.65 barrel, a hike of almost 350%. This resulted in steep rise in the energy price for the countries like Macropoland - an natural gas and oil importer country. So there was substantial rise in cost of production for the Macropoland economy, which resulted in large fall aggregate supply. It is this fall in aggregate supply that was responsible for large inflation and unemployment rate (a situation called stagflation) during this period. In other words, it was cost pull inflation (driven by high crude oil price) that was responsible for stagflation in Macropoland economy during 1973-1974.…
The most significant factor in the production of gas is crude oil. The prices in gas fall and rise due to the cost of crude which is established by supply and demand on the global commodities market. During the recession in 2008 and 2009, the gas prices went down because of less demand. However, as the economy progresses, the demand is rising. In the meantime with conflict in the Middle East and North Africa, the supply is at risk. With both the rising demand and the risk of reduced supply, gas prices are increasing. Crude oil comprises of more than 65 % of what Americans pay at the pump. In addition, gas prices are impacted by costs of refining, distribution, government and marketing taxes (API, 2013). This information is especially important to those who…
Bibliography: A Crude Awakening: The Oil Crash. Dir. Basil Gelpke, Ray McCormack. Lava Productions AG,…
For thirty years Americans have watched as our Presidents have debated over the foreign oil dilemma. Throughout those thirty years little has been accomplished. Research has been done and we have finally gotten the hybrid car on the market, but the use of foreign oil is still a drastic measure and keeps rising each year. There are many options America could use to end this war on oil. Some of them include the use of ethanol, hybrid cars, and nuclear power plants. We do use some of these, but perhaps we need to expand their use instead of looking to the Middle East to continue to supply our needs. However, we have not taken the time, nor initiative to research some of these ideas further. For instance, ethanol as a fuel is available in some…
The global supply of energy is concentrated within the 12 OPEC countries. (Organisation of the Petroleum Exporting Countries). These countries hold a vast amount of the world’s oil and gas reserves with 81% of proven oil reserves and 49% of proven gas reserves. The aim of the organisation is to unify petroleum policies so that there is a steady supply of energy to consumers, and a steady income for themselves- the producer. OPEC sets production targets for its member nations and generally, when OPEC production targets are reduced, oil prices increase. This was clearly seen in the 1973 Arab Oil Embargo against the US and the West in response to the US’s involvement in the Yom Kippur war against Egypt. The OPEC countries prohibited trade with the USA, UK, Japan, Canada and the Netherlands. It caused the price of oil to rocket, and many countries went in to depression. This shows the importance of cooperation between OPEC member states, as their decisions can affect the price of energy. Furthermore, it emphasises the importance of countries such as the USA cooperating with oil producing countries such as the OPEC countries where energy has been used as a source of power.…
Samuel Huntington, the cause is a struggle for resources (xii). Oil as special resource: 2001 and since revelatory of the consequences of oil dependency (xiii-xv). Goal of book: “Tracing the evolution of U.S. oil policy and weighing its consequences for the future” (xvi).…
With the onset of the embargo, U.S. imports of oil from the Arab countries dropped from 1.2 million barrels a day to a mere 19,000 barrels. Daily consumption dropped by 6.1 percent from September to February, and by the summer of 1974, by 7 percent as the United States suffered its first fuel shortage since World War Two.…
After many years of non-stop action, America finally fell into an uneventful lull. The 1970s were an in between period for the nation. It is often referred to as America’s hangover; a stretch of time where the country had no forward motion. The traditional family and gender roles were becoming more obsolete. The Middle East substantially rose the price of crude oil, which was accredited to the severe inflation the nation experienced during this time. President Carter did little to help the country overcome this problem, but, fortunately, his successor did. In the 1970s, America experienced a great sense of change, withdrew from traditional ways, and struggled to overcome its problems.…
The “Financial Times” magazine in 2007 revealed that Iraq could have almost double the reserves of oil than it had earlier been thought. The war thus meant that it could be hard in the future to deal with Iraq’s security even to matters that concerned its oil and by products. This means that the global prices of oil could be affected by the war as it had a direct affect to its production (Gafarli, 2007). The oil prices have since increased steadily and have continued to sell high since the war began. The prices of crude oil do not affect just the United States, but the entire world. A good example of a country that is suffering from this is India. India’s oil demand increases at a steady rate of 4-5 percent annually. Iraq has since ruled out any subsidized oil prices to India, stating that the law of the land does not allow them to do so. This has adverse effects on the economy of India as it imports about 20 million tons of oil from Iraq every year. This means that Iraq is the second largest supplier of oil crude oil to India (Lee,…
The idea Edgar has for opening up four new gas stations is based on a well based argument making it viable as a profitable business venture. The evaluation on the American consumer to accept the high price for gas oil prices forms the first approach towards establishing a business. Gasoil businesses in the world run as cartel where it supply and prices are determined by the few stakeholders in the industry. The stakeholders form an agreement among their competitors on the price, making and, marketing of the product (Fredy, 2010). The cartel though the production affects the GDP growth rate. Gross domestic product represents the monetary value of the goods produced in the country within a year.…
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)…
Over the past 40 years, investment decisions have been made by the United States based on such events that have affected the oil industry. The recent increase of oil prices has affected the economy negatively. In the 1970’s, oil prices stayed around $20 a barrel. In 1946, the average cost for a barrel of oil was around $1.60 compared to $96.80 in 2008. (Williams, 2008) The change in the US dollar is another cause for the fluctuating prices in oil demand. The need and demand for oil is leaving us dependent on other countries such as Libya, Nigeria, Iran, Iraq, and Venezuela.…
The Organization of Petroleum Exporting Countries (OPEC) was created in 1960 with the idea of unifying and protecting the interests of petroleum-producing countries but in the end, only resulted into little impact until 1973. Before this organization, the great oil companies of the West ruled the roost. Oil is the lifeblood of the industrialized nations as it is used to fuel planes, cars, tanks, skyscrapers, fertilizer, drugs and synthetics. Yet back before the days of OPEC, the great oil companies often retained 65% or more of the revenue from a product that was produced on someone else's property. Then in 1960, many of the oil producing nations, from both the Middle East and elsewhere, formed a cartel to protect their interests. The members of this organization include: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Indonesia, Libya, The United Arab Emirates, Algeria, and Nigeria. Their goal was to “slowly take over the function of the companies – beginning with production, and then increasing the amount of revenues they could retain. Despite that, their impact on the world was very little, but, that all changed because of the Arab-Israeli War of 1973. The OPEC oil embargo dramatically impacted the way Americans viewed scarce resources and how they found new sources of energy, as well as converse energy independently.…
As an industrial superpower, oil is an extremely important factor in maintaining that status. The United States and the entire world depend on oil to run their machines and engines. The Middle East produces over 60% of the world's oil supply. Demands for this oil increases every year. The United States relies on the Middle East for about 14% of all oil needs, but that percentage keeps on growing. As disaster and lack of reserves damage our own oil reserves, the United States needs more options for obtaining oil. The Middle East is the cheapest to extract. We need to maintain a healthy relationship with these Middle Eastern nations to be able to use these oil reserves.…
Oil surge has influenced all over the world. According to a report published by the International Energy Association (IEA):”high oil prices have hurt the global economic. If gas prices…