Home/Essays Examples/Economics/The Oil Benefit in the United States

The Oil Benefit in the United States

The world is ever-changing, and we must learn to adapt to these changes. We receive the majority of our oil supply from other countries, predominantly the Middle East. As a nation we rely on these resources from others countries and we often find ourselves at the mercy of these nations. When will the United States finally say, “Enough is enough!”, and figure out an alternative way to provide oil to the Americans? America’s working families have been squeezed for most of this decade by stagnant wages and diminishing health and retirement benefits. Now, they face new economic pressures from rising gasoline, food, heating, and electricity prices (VOX, 2009).

The American consumer is forced to accept these monetary demands, while still trying to maintain a “normal” day-to-day life. For years Americans have been told of the possibility of other resources that could be used to alleviate the overreliance on these other countries to provide oil to the consumer. Thus, the oil benefit changes every thing in the world, and we must learn to adapt to these changes.

Shale gas production has become a hot topic in the petrochemical industry, with executives calling for the possible addition of petrochemical feedstocks from shale-derived Natural Gas Liquids (NGLs) a “game changer.” When the term “game changer” is used, you know it is of importance. The biggest area of innovation in the oil and gas industry is the ability to exploit shale gas production in the North American market. Shale is found in many places throughout the United States, but especially in places such as Barnett, TX; Haynesville, LA; and Fayetteville, AR. Potential U.S gas reserves have increased due to coal bed methane and shale gas developments (American Association of Petroleum Geologists, 2003).

Much of this growth has been in Louisiana, Oklahoma, and Texas, but also on the east coast as far north as upstate New York. This can only be seen as a victory in the future production of gas/oil for the United States of America. Through proper planning and leadership, we as a nation can learn to take the burden off the U.S. and reduce its reliance on other countries for the production of fossil fuels.

Many American citizens believe that the fact that the US is dependent on such other oil producing countries as Saudi Arabia implies that the US is inferior to these countries. However, this is not exactly the case because the US can explore alternative energy sources that are much cheaper, environmental friendly and are much efficient for sustainable economic growth. Energy cooperation between the US and the Arab countries that produce oil can also meet the growing US and global oil demand. An inclusive approach to promote cooperation between producers and consumers to best serve the interests of all players and enhance global economic prosperity will suffice.

This statement is very interesting because it shows a very different view from what is believed to be the consumer belief, but while preparing for this paper and reviewing certain articles, it is understandable that we, as a group of nations need to rely on each other to be successful.

In simple terms, the United States depends on the Middle East for oil. Washington, like the rest of the world, is part of a large global economy, where all players depend on each other. The global economy is largely run on petroleum. Indeed, oil is the single largest fuel in the primary energy mix and is the largest primary commodity of international trade in terms of both volume and value. Because of the large global economy that we are part of, dependence on fossil fuel is inevitable.

Oil consumers and producers depend on each other to ensure their economic and political stability and that of the international system. The availability of sufficient volume of petroleum is more important than its source. To put all of this into simple terms: the Middle East needs us just as much as we need them, so it should not be seen as a weakness to have developed a need over the years. For a successful global economy, which includes the United States, there is a definitive need to rely on, and work together with other nations.

As discussed earlier, there are many solutions to these problems. It must be understood that over reliance on fossil fuel has caused many problems concerned with economic sustainability and environmental issues. Fossil fuel is known to produce greenhouse gases that deplete the ozone. Some of the gases such as Sulfur Dioxide and Carbon Dioxide cause acid rain that is quite detrimental to the environment. In addition, there are man economic problems that have been caused by over reliance on oil. It is not uncommon to learn that whenever a political situation arises in the Oil Producing and Exporting Countries (OPEC), petroleum prices usually shoot up, causing inflation in many countries on the globe (Momani, n. d.).

It is the above reasons that make many western countries to reduce their overreliance on fossil fuel by exploring alternative sources of energy. Thus, the US must come out clear on the use of green energy such as solar energy, geothermal energy and wind energy. The increase in the use of solar powered machines greatly reduces the amount of oil used in an economy. For instance, power generated automobiles can operate in the absence of oil.

Wind energy can be channeled into factories to run them and geothermal energy can be used to generate both industrial and domestic power. In addition, green energy is always renewable, cost effective and improves energy efficiency, prevents acid rain generation and helps in mitigating acid rain (Free articles, 2010). By doing this the US will find it easier to cope with fluctuating market prices of crude oil caused by instability in the OPEC members.

However, the US can still find some other solutions through exploitation of their natural resources. There is much debate as to the actual oil potential and success of drilling because there isn’t a tremendous amount of concrete proof on how much natural resources are available. Much of the testing is based on surrounding areas. Because of the continued improvements of drilling technology, this suggests that hydrocarbon resources can be developed with minimal impact on the regions wildlife. Since the early 2000’s, policymakers, who support oil and gas exploration in ANWR, argue that the development of the regions hydrocarbon resources would create new jobs, especially for the local population, as well as improve the balance of trade for the US through reduction in the nations import bill and provide a needed buffer against future oil supply crisis and price spikes.

It is certain though, that US gasoline prices will continue to be strongly shaped by their fundamentals, as well as being influenced by other developments in the petroleum complex. Unplanned outages in the US logistics system and refining centers, or major disruptions in external gasoline supplies, could trigger price spikes that would, in turn, lead to frequently stronger crude oil prices. Such forecasts in the future can be supported by the problems that have arisen currently in Libya, and how those issues have indeed affected the price of gas here in the United States.

Over the last few years, the United States, along with the other nations, has felt the sting of increasing gas prices. In June of 2008, the nationwide average of gasoline prices exceeded the symbolic threshold of $4.00/gallon (Krauss, 2008), and for the first time in nearly two decades it appears that driving less has become the only option for American motorists. Talks of gas prices seem to be an everyday conversation among most Americans daily.

When the gas prices rise, all we hear is a discourse of anger, pain and gouging. There is much to take into account when understanding the price of gas. Today, oil is the world’s most heavily exchanged commodity, with “light, sweet” crude the most heavily traded in over 161 different types. Oil that is “light” has a low density, and “sweet’ means low sulfur content. These determine the quality of the oil, or how much of the oil can be refined into gasoline (Haubrich, Higgins, & Miller, 2004). It stands to reason that this is a huge factor when determining the price of gasoline.

Owning the oil has a much more benefit than relying on oil from other countries. Because oil is easy to store in the ground, there is a benefit of keeping it there. Not only is the future demand for oil-and thus its price-uncertain, but future supply costs are uncertain, as well as extraction costs (labor, drilling supplies, and pipe costs) are uncertain, and so the profit from pumping oil six months from now is unknown.

Keeping the oil in the ground means you can choose to pump oil when the prices are high, and when low, leave it in the ground and wait for higher prices (Haubrich, Higgins and Miller, 2004). Having said this, I think it is safe to say that the bottom line is: Gasoline is a money making business regardless of where the gasoline is coming from.

While it does still seem profitable for the United States to continue researching alternative options for the consumer, and the ever rising costs of gasoline, it is also safe to say that we all rely on each other as nations to provide a much needed product for the consumer. In his State of the Union speech on January 31, 2006, US President, George W. Bush called for a drastic change in the nation’s energy policy. We live in a fast-paced world, in which we require the use of oil, and until we find an alternative source we will always be heavily reliant on other nations. So, perhaps the answer is to develop these other sources of fuel, so that other nations will begin to rely on us as a nation and provider.

Reference List

American Association of Petroleum Geologists, (2003). Giant Oil and Gas Fields of the decade 1990-1999. London, UK: Geological Society Publishing House.

Free Articles. (2010). Advantages of green energy. Web.

Haubrich, J., Higgins, P., & Miller, J. (2007). Peak Oil. Web.

Krauss, C. (2008). Gas Prices Climb Quickly as Refineries Remain Closed. Web.

Momani, B. (n. d.). A Middle East Free Trade Area: Economic Interdependence and Peace Consideration. Ontario, Canada: University of Waterloo.

VOX, (2009). Oil prices and the economic recession of 2007-08. Web.