Role of Oil in the History of the United States - Essay Example

Module Role of Oil in the history of the United s Oil has been the primary fuel for various industries over the years; hence it has played a central role in the economic development of many societies globally. A rise in the price of oil mainly due to reduced supply causes an increase in the aggregate prices of products. This is also because of the dependence of virtually all economies on oil for fuel. The general increase in prices of products has a negative effect on people as this lowers their living standards based on their reduced purchasing power (Cordesman and Al-Rodhan 33). Moreover, it results in the widening of the gap between the haves and the have-nots, which in turn results to an increase in levels of crime in the form of drug trafficking and abuse, and theft and burglary among other criminal activities. Politically, oil affects society as the ruling elite strive to acquire and sustain control of oil wells or the oil business, and make political decisions in such a way that the supply of oil would not be affected negatively. This essay reviews the role of oil in determining the social, political and economic history of the United States over the years since the 1970s to the present. Situation of Oil in the 70s In 1973, the United States government decided to supply the Israeli military with artillery and other war requirements during the Yom Kippur war. This stirred a response by the Arab country members of the OPEC who withdrew from the organisation that was the primary oil producer at the time (Pelletière 140). The United States took the blame for disrupting oil supply and creating the possibility of high prices of oil and a possible recession, which resulted in tensed relationship with other countries. These countries included some European countries and Japan, all of whom took measures that could have cut ties with the United States. Moreover, Regan lost the presidency to Bush owing to his poor policies when the country needed him, especially by opting to commit resources to fight communism instead of fighting poverty back home. This shortage of oil had an economic role in the stock market crash of 1973 to 1974, which resulted in loss of investments in the stock market. When the Arab countries realised the impact that oil shortage had on the world, they decided to practise price control measures, which resulted in a sustained increases of prices in the United States over the years. This resulted in an increasing price of goods and services, and resulted to deterioration of living standards in the United States, which mostly affected the poor and minorities with the average annual income for poor families reaching a low figure of $5,439. Though economic growth had been witnessed in the previous decades, reduced growth in the 1970s resulted in widespread poverty, especially among the poor and minority groups, which resulted in widespread crime among these vulnerable groups of the population. During this time the rich became richer, which acted as fuel for crimes against the rich, with family incomes getting lower for factory workers despite the government’s use of public money to fund Iraq’s war with Syria and Iran in the late 1970s (Pelletière 237). As a response to the deteriorating conditions in the country, there was widespread social activism especially by young professionals. Situation of Oil in the 80s In the late 1970s, the OPEC increased oil prices to more than double, such that, in the early 1980s, prices were so high that the demand for oil in the United States reduced considerably. The reduced demand and increased non-OPEC production of oil resulted in an excess supply of oil in the United States, which resulted in a drop in oil prices. However, these prices were still higher than their pre-1973 levels since the prices had quadrupled over the years, which reduced the impact of the over 46 percent reduction in prices. In order to encourage trade and production in oil related products, the Carter administration removed regulation in the oil sector in 1979 to allow the price to be controlled by market forces. The Regan administration enacted the change in 1981 to allow free market of oil in the country by ending artificial shortages that encouraged oil production. By 1988, the United States national government had eliminated taxes on profits from the oil business in order to spur market growth (Wittkopf, Jones and Kegley 205). The country’s reliance on the Middle East as oil source decreased due to reduced demand and the emergence of alternative sources of oil including Canada, Norway, Nigeria, Britain and México. The fluctuating nature of oil necessitated the adoption of other sources of energy as fuel for industrial and domestic use. Nuclear and natural gas were used in electricity generation; natural gas was used for domestic heating, and vehicles used ethanol blended gasoline to reduce the demand for oil. The 1980s oil glut benefitted the United States economy; as usual, the chief beneficiaries were the rich and the situation did not change considerably for the poor who did not directly use oil. Moreover, the glut limited the chances of achieving independence in oil production because the reducing prices and oil surplus discouraged domestic oil exploration (Wittkopf, Jones and Kegley 320). As usual, instead of using resources for local causes, the administration used resources to provide Iraq with biological agents including anthrax, botulism and brucellosis throughout the 1980s. Situation of Oil in the 90s In 1990, Iraq invaded Kuwait and caused a decrease in oil supply globally, which resulted in a sharp increase in oil prices in the early 1990s that reduced gradually throughout the decade. Moreover, the 1990s oil price spike takes the blame for the recession that occurred in the early 1990s. The price more than doubled from $17 per barrel in July to over $36 in August 1990. Once again the United States used its domestic resources in war against Iraq in the 1991 desert storm, though this time there were direct benefits and the price of oil had returned to normal in 8 months. The United States government enacted policies that aimed to minimise fluctuations in oil prices, a strategy that resulted in a peak of oil prices per barrel in October 1990, though the price reduced gradually until 1994. In order to spur economic growth, the government cut spending of $50 billion on the military (Orszag 524). By this time, society had evolved such that women had become central players in economic matters, and the economic situation in poor families was improving. Situation of Oil from 2000 to Present The 2000s saw an increase in oil prices per barrel from $25 to $30 in 2003, $60 in 2005, to $ 147.30 in 2008, an increase that was attributed in part to reports by the United States department on depletion of oil reserves, instability in Middle East, and oil price speculation. However, the recession that started in 2008 resulted in reduced demand for oil such that the price of oil per barrel reduced to $32 by December 2008. The prices went up again within a year to around $100 per barrel. However, the world emerged from the oil crisis with new approaches to environmental conservation due to the sustainability issues of oil as a fuel (Gorelick 52). The crisis increased the research on alternative fuels, and though a lasting substitute for oil has not yet been found, some progress has been achieved, whereby both the rich and the poor work together to come up with alternative energy sources. Conclusion Oil has played a central role in the political, economic and social development in the United States, especially due to its ability to form and destroy alliances, and the lengths to which a country would go to ensure availability of oil for domestic consumption. Moreover, changes in oil prices affect the prices of other products directly or indirectly and thus play a part in determining the quality of life for United States citizens and residents in general. Works Cited Cordesman, Anthony H., and Khalid R. Al-Rodhan. The Changing Dynamics of Energy in the Middle East. Greenwood Publishing Group, 2006. Print. Gorelick, Steven M. Oil Panic and the Global Crisis: Predictions and Myths. John Wiley & Sons, 2011. Print. Orszag, Peter R. American Economic Policy in the 1990s. MIT Press, 2002. Print. Pelletière, Stephen C. Iraq and the International Oil System: Why America Went to War in the Gulf. Greenwood Publishing Group, 2001. Print. Wittkopf, Eugene R., Christopher Martin Jones, and Charles W. Kegley. American Foreign Policy: Pattern and Process. Cengage Learning, 2008. Print. Read More