Political Economy of Oil Essay Example | Topics and Well Written Essays - 2500 words

policy-making Economy of Oil - Essay ExampleThe crises that started with the vegetable oil colour crisis in 1970s extended to Gulf warfare in the 90s. There are different terrorist threats today that affect oil resources such as oil refineries in Saudi Arabia. The deteriorating law and order situation in Iraq also resulted in fear of disruption of oil supply. There are threats of war with Iran that bring greater fears of volatility in the oil-producing region. These & other such factors have kept oil prices very high and they affect current securities industry scenario. The hope for stability in oil prices is dependent on both political & economic stability.Transportation, heating, power generation, the plastics, pharmaceuticals and synthetic grapheme industries are the of import ways in which oil is consumed. Demand for oil is greater in the unquestionable nations compared to the developing economies. United States of America solely generates a quarter of universe oil dem and. Asia comes next with japan having the highest inlet of oil. In Europe no one province can be considered highest oil consume country instead the demand is evenly generated by all European nations, The demand for oil small considerably in Soviet Union after its collapse.US demand for energy is greater and its dependence on oil producing countries is also increasing.The oil supply is mainly provided by sizeable companies operating in countries with large reserves of oil. Countries like UAE, Saudi Arabia, Venezuela, Norway and Kuwait are some of the oil rich countries and are main suppliers of oil to the population. Since supply side of equation plays a crucial role in stabilty of oil markets, the countries producing oil have been trying to stabilize the price of crude oil through production policy. However, the interest of world economy does not lie in bringing stability by production manipulation. Since oil is a resource that depletes with time so its value increases with t ime as well. A country cannot let go of its future worth or value by increasing its production at the current market price. It is not in the economic interests of such oil producing countries to pursue a production policy repugnant with their own economic interests.Countries like Saudi Arabia have been contributing to the world economy in common and other Western and developed economies like Japan in particular by supplying more than oil than it should. For instance Saudi Arabia, of the largest oil producers, increased its production of oil after the oil crises of 1979, resulting in a downward crude-oil price trend in world markets. This manipulation by any country or cartel cannot reap economic benefits in the long run. The market factors should be allowed to play their callable role instead of manipulation. There is an increasing trend in demand for crude oil because consumption is greater than the supply. Market economy is the best way to allocate resources. The cin one casep t of oil peak suggests that once we reach the stage of peak the economy will be greatly affected. Similarly experts say that world oil reserves will also reach its peak in not so contrasted future resulting in price hikes and economic recession along with geopolitical repercussions.Oil Situation in USAIf we consider the oil peak theory according to which there will be a sharp decline in supply because demand is constantly increasing whereas the speed of finding or exploring new oil sources is not matching that then we come to know that the oil