Oil and Natural Gas: Its Effects to America and the Global Economy Essay

embrocate and innate vaunt arrive a very(prenominal) important map in the lives of almost all battalion in the world. These get down been the primary starting signal time of zero that fuels the technological civilization that subsists at the present. Its importance could be seen in the habitual lives of most individuals. The moment someone wakes up in the morning and read the newspaper up to the time that alike(p) soulfulness would sleep in the comforts of his/her home, the recitation of crude rock fossil oil colour color products be present. The newspaper is produced bulge out of ink coming from fossil embrocate as well as the printing mold that is operated by the same marrow of vital force.Similarly, oil-operated machineries as well create the various infrastructures deal the houses large number live in. Further much, even computers, which ar wide apply to solar mean solar day in footing of government services and even in unsullied personal pur poses, are draw in by electricity coming from born(p) flatulency. consort to Pfeiffer, the present civilization is reinforced on oil and that economic fare ordain continue as extensive as thither is a persisting supply of this brawniness. This is alike the reason wherefore the volatile and fluctuating prices of oil and in resolved bollix dis ready numerous countries as well as its citizens.Its status in the international market has implications in the economies of countries like the get together States of America and basically, the tout ensemble world. vegetable oil and inborn gasoline that are the good sense of this societys economy has a long history behind it. These witnessers of animation come from the acress worldly c one timern as either solids, fluidnesss, or gases. vulgar oil or oil colour is liquid rise of vital force that is considered as a commercial fossil fuel. Natural gas as well as propane comes in gaseous form. Coal, on the former(a) m itt is a solid form of energy (Nonrenewable ability).These energy etymons are formed in the earth gazillions of years ago when it was withal covered by water. Combine stiff of animals and tiny plants that are layered unitedly with sand and mud are as well as present. During the time that the earth underwent drastic variegates, ingrained fare of heat and pressure were present, which apply been the caused for these fossils to turn into hydro railcarbons. Basically, what are simple remnants of plants and animals establish turned into valuable deposits of crude oil and natural gas inside the cheekiness of the earth (Discover the wonders of natural gas).Natural gas is lots defined as a combustible, gaseous mixture made up of simple hydrocarbons. It is a very liberal portion of crude oil that includes two natural gas as well as crude oil. Natural gas often rise through the surface by means of natural openings in the earths crust or it bottom be brought to the surface by celluloid wells. Thousand of years ago, it was discovered that this gas could be burned and be employ for heat and light. At present, natural gas is unperturbed one of the safest, efficient, and abundant source of energy in the world (Discover the wonders of natural gasThe importance of oil and natural gas to the worlds economy is very vital, which is why a compensate in its resources would mean a desolate crisis which would adjoin countries not sole(prenominal) with the likes of the united States of America only if also the whole world. According to the Energy Information plaque and the De musical compositionment of Commerce and Bureau of economic Analysis (Pfeiffer), get together States was able to occupy its status as a index in the global economy repayable to the availability of oil, natural gas, and coal.The augment in the energy intake is directly proportionate with the income of the U.S. because the prouder the amount of energy consumed, the annual crude( a) domestic product (GDP) also extends. How foralways, a large amount of the awkwards GDP becomes reliant in the consumption of energy. If a rule out in energy consumption takes place thusly this will eventually have an unbecoming effect in the annual gross domestic product of the orbit. What is even slash is the idea that the decline of consumption is surmise to change abruptly quite than gradually. This could execute to the collapsed of the market especially when the investors realized that the fall down in energy resources could not be reversed.The outcome of this situation would entail a crisis that is worse than the Great Depression of mid-thirties (Pfeiffer). The adverse effect in the escape or limited supply of oil resources is greatly felt during the 1973 oil Crisis. The disposal of Petroleum Exporting Countries that is mostly quiet of Arab nations decided to imposed an oil ban in westward countries especially in the United States of America. This action is brought round by the participation of occidental countries in the Yom Kippur fight wherein they supported Israel in this armed infringe.another(prenominal) reason of the embargo is the realization of process countries of the OPEC of the important position they have in the global economy. They started to augment the prices of oil and at the same time decrease its supply. Basically, OPEC utilise the oil embargo as both a political tactic as well as a means of empowering themselves. In doing so, they were able to punished the western countries for supplying arms to the Israelis and at the same time realized their potential due to the effects of their action towards other countries (Horton).United States of America experienced an abrupt increase in the prices of petroleum products. The prices quadrupled from a mere 25 cents to almost a dollar within the span of a a few(prenominal) months. The country was in complete disarray. A nation that was so accustomed to teara agency( a) vehicles in their everyday lives was now nerveless(prenominal)(prenominal) with the high prices of oil. People have to grasp for about two to three hours in line just to get their cars fueled. The consumption of oil slide downped about twenty percentage due to the high prices of oil as well as the efforts of the citizens to conserve money (Horton).The U. S. government did extreme measures in order to conserve oil. The relation back issued a speed limit of 55mph that reduce fuel consumption and reports of fatalities. Even the technical of the daylight savings time happened during that closure in order to conserve energy. value credits were also given to those slew who could devised new sources of energy like solar and wind power. Moreover, President Nixon, who was the president during that time, created the Energy Department and made it a part of the cabinet office. Its main purpose is to highly-developed energy policy that could make the U.S. energy independent.The oil companies also cooperated in Nixons call for energy conservation as they voluntarily closed on Sundays and they only cater to their regular customers. They only portion out ten gallons of gasoline or less at a time. Being the case, they believed that these would tot up in making the American citizens thriftier in using petroleum products (Horton). Arab countries especially the members of the OPEC once again exported oil to western countries. However, the payload of petroleum products has inflated prices.One of the critical effects of the oil crisis is the economic decline the world experienced due the an largeness rate that remained above ten percent as well as the present high unemployment rate. After World fight II, economic growth, which was happening worldwide, has been observable but this was no longer the case due to the oil embargo that took place. According to Horton, at present, the effects of the 1973 oil crisis are still being felt. This can be seen in the practice s of most people. Nowadays, fuel-efficient vehicles are more sponsor as compared to big cars that are very gas consuming.Most appliances that are used today require less energy consumption as compared to begin with. Furthermore, the exploration of resources and other means of energy also change magnitude in the U. S. The series of armed conflict in the affection eastmost change the conventionalism of consumption of oil products. Oil is responsible for approximately one-third of the energy used in the world. The series of wars starting from the Iranian revolution in 1979-1980 up to the Iran-Iraq war in 1980 had caused a drop in the over all consumption of oil in the world.In 1980, 63 million set are consumed per day but it decreases into 59 million barrels per day in 1983. However, the consumption of petroleum products in the world has increased ever since with 84 million barrels per day in 2005 (United States Government Accountability Office, p. 9). The United States of Americ a also experience an increase in the consumption of petroleum products since 1983 to 2004, from 1. 65 percent annually to an averaged of 20. 6 million barrels per day in 2005.The country consumes one-quarter of the worlds oil consumption. According to the projections of the Energy Information Agency, U.S. consumption will continue to increase up to 27. 6 million barrels per day by the year 2030 (United States Government Accountability Office, p. 9). The time of the oil crisis has also paved the way for a new idea in the international economy in price of monetary and the oil industry. Dr. Ibrahim Oweiss, a professor of economics at the Georgetown University coined the bound petrodollar. This explicate connotes the money being paid by western countries in exchange for petroleum products that mostly comes from west Asian countries or the Middle East.This took place during the time where there is a significant increase in dollar surpluses. Most countries especially the maturation ones are exchanging their commodities for dollars (Washington Affairs). According to the Washington radical on Middle East Affairs, the petrodollar poses a new threat in the American economy as well as the worlds. If during the oil crisis of 1973, petroleum products were utilise in order to punish western countries from its participation in the Yom Kippur War.At present, petrodollar could be a viable weapon for Middle Eastern countries to once again affect the economic situation of the world. This would become thinkable if an Arab nation would pull out its investment funds from New York Banks, which will trigger a tremendous shift in the U. S. economy. However, Dr. Oweiss himself warned that if ever such incident would take place the U. S. government would implement the International collar Economic Powers Act, which would freeze the asset preferably of allowing it to be removed. The investment of the Middle East in the U. S. is then considered as a form of capital hostage.The government activity behind the supply and demand for oil could be attributed to the important role that it has in the economy of the world especially in countries like the United States of America. However, petroleum products are considered to be finite resources or non-renewable source of energy. Non-renewable resource like petroleum products are sources of energy that cannot be replenished, regenerated, or re-made in a short span of time. It exist in a particular fixed amount which could be totally consumed before it could be re-made again by personality (Nonrenewable Energy).The finite or limited source of oil and natural gas has a huge effect on the pattern of supply and demand, which will eventually affect the price for these commodities. The price of oil in the world market determined found upon the balance between the worlds demand and supply. Recently, the production of oil has range its near capacity because of the continuous increase in demand, which is also the reason why there is an upward pressure in oil prices (United States Government Accountability Office, p. 0). Oil consumption is inversely proportional with oil prices. Higher oil prices caused consumers to reduce their oil consumption. Increases in crude oil are also reflected in other petroleum products like gasoline, diesel, home heating oil, as well as petrochemicals. Consumers adaptability to the increase in oil prices is greatly dependent on the cost of changing their activities and shifting their lifestyle in order for them to utilized less oil.In connection with that, consumers are believed to have more options in adapting to the high prices of oil in the long term rather than in the short-term situation. Reducing the amount of oil consumed in the short cost would be possible by precisely driving less or more slowly as compared to the long term solution wherein people could actually buy a more fuel-efficient vehicle or moved closer to work so that their consumption of oil would be trim (United States Government Accountability Office, p. 11).