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Impact of Oil - Assignment Example

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Notably, the increase in the oil prices of mid-1970s from $4 through to $35 a barrel reduced aggregation in the oil supply thereby causing rapid cost-push…
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Impact of Oil
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Impact of Oil Impact of Oil In the mid-1970s and early 1980s, the prices of oil seemed to have had a significant impact on the United States’ economy. Notably, the increase in the oil prices of mid-1970s from $4 through to $35 a barrel reduced aggregation in the oil supply thereby causing rapid cost-push inflation in America’s economy. The late 1980s through to the most parts of the 1990s reduction to the oil prices showed a positive supply shock benefits to the United States’ economy. From the year 2002 through 2005, several storms hit on the oil production including conflict in Iraq and interference of hurricane (United States, 1991). Moreover, during the same period there was increased demand for oil in numerous nations including China and India due to their increased industrialization (United States, Maloney, and Schumer, 2007). The subsequent instabilities in oil production and increase, in oil price per barrel of the 2000, s had no destructive effect on the United States’ Economy. Therefore, it is apparent that the current effects or instabilities on the oil prices have little effects on the United States’ economy, as it was the case in the 1970s and 1980s.
The main reason towards these changed effects is that there has been a reduction on energy (oil and gas) spent in producing each dollar in the United States’ output. Additionally, there has been a shift in production techniques, that is, the current technologies only require a small amount of energy for production compared to the 1970s and 1980s technologies (United States, 1991). Economic experts estimate the current United States’ economy to be less than 33 percent dependent or sensitive to oil price fluctuation unlike over 55 percent less sensitivity in early 1980s and even more in the mid-1970s. (United States, Maloney, and Schumer, 2007) Finally, the Federal Government has since developed vigilant and adept monetary policies of handling inflationary impacts
References
United States. (1991). U.S. oil import vulnerability: The technical replacement capability. Washington, DC: Congress of the U.S., Office of Technology Assessment.
United States., Maloney, C., & Schumer, C. E. (2007). War at any price?: The total economic costs of the war beyond the federal budget. Washington: U.S. G.P.O. Read More
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