Escalating Oil Prices And The Global Economy.

2285 words - 9 pages

With the current rise in oil prices, many people are asking themselves, "What is going on?" Oil prices are of major interest to everyone not only in this country but everywhere. It seems that everyday gas prices are spiking and haven't been stable for a long time. In order to fully understand this problem and how it is affecting the global economy we need to look at the variety of factors that are involved. These factors include but are not limited to the history of the oil crisis in the United States, causes of our current situation, and possible outcomes for our future. Several individuals are researching different alternatives to try and come up with the best solution for this problem. The escalating oil prices has become more severe then anyone expected and is beginning to reflect oil crisis of the past.The price of gasoline is affected by many factors, including the price of crude oil in the world market, supply and demand for gasoline, local market competition, temporary supply interruptions, government regulations, or taxes. The current crude oil price spike began in 1999 due to several reasons. One reason was the struggle in the Middle East along with minimal policy changes from the Organization of Petroleum Exporting Countries and the United States Government. This has kept prices high to this very day (Miller, 1998). Another factor in the price of gas is the price of crude oil extracted from oil wells beneath the earth's surface has been high. There are five leading countries that supply the world with old. They are the Soviet Union, Saudi Arabia, Venezuela, Mexico and the United States. These five countries made up 61 % of the worlds oil production back in 1980 (Miller, 1998). There have been many major shifts in the price of oil that are linked to different events in world history (Miller, 1998).First, the Arab Oil Embargo of 1973 caused a widespread oil crisis and made the crude oil go from three dollars to twelve dollars a barrel. Second, the 1979 Iranian revolution caused another oil crisis which made oil prices go to a all time high of thirty-six dollars a barrel. The third major shift happened in 1991 because of the Persian Gulf War (Miller, 1998). The terrorist acts upon the United States on September 11th, the Iraqi War and the manhunt for Osama Bin Laden have now brought on another major shift in our oil prices.Even though The United States is a major producer of oil, it does not make them self-sufficient. The United States utilizes more oil than they can produce and has to look to get help from foreign countries. In September of 1960 the Organization of Petroleum Exporting Countries (O.P.E.C) was formed in Iraq (Miller, 1998). There were five initially five members in this organization: Iraq, Kuwait, Saudi Arabia, and Venezuela. Six other nations jointed the organization by the end of 1971. They included Qatar, Indonesia, United Arab Emirates, Algeria, and Nigeria (Williams, 1999). They control approximately four fifths of...

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