The imbalance of supply and demand of foreign oil Essay Example

per person to foreign oil companies, despite the fact that U.S. oil consumption makes up just 11% of worldwide production.

Excessive dependence on oil has had unfavorable consequences for S.'s economic and political wellbeing, leading to negative outcomes. As per Annett's (2004) findings, the trade deficit amounted to $54 billion in 2004, of which imported crude oil contributed over 20% or $12 billion. Greenspan (2004) highlighted that Americans bear the burden of the exorbitant price of imported oil, which makes up 75% of the United States.

In 2004, a warning was issued about economic productivity and the potential for more severe economic repercussions in the United States if oil consumption and prices continue on their current path.

There is a notable increase in oil acquisitions in Washington by U.S. states to avoid possible political interference. OPEC has spent $13.3 million on national promotion and an extra $6 million since 2003.

As stated by Peterson (2004), Saudi Arabia's lobbying endeavors led to a contribution of 6 million dollars. This lobbying has resulted in the presentation of a proposed law to Congress that would ultimately raise the U.S.' reliance on oil imports instead of decreasing it, and attract various oil firms to different locations within the country.

Attempts are being made to conserve oil by reducing usage in untouched regions and implementing conservation tactics. Nevertheless, this strategy is dependent on possibly unsteady overseas administrations that may lead to safety hazards for US citizens as a result of unmonitored consumption. Regrettably, the predicament cannot be entirely resolved.

According to Associates for International Research Inc. (2005, ¶7), S. has very limited oil reserves, amounting to less than 3%. Even if they were to explore the

well-preserved Arctic National Wildlife Refuge, this would only increase their reserves by less than 0.33%. OPEC is also quickly depleting their production capacity, in line with the Federal Reserve. Therefore, there is no guarantee in looking towards OPEC's future.

Insufficient investment in new manufacturing capabilities by non-OPEC nations is hindering any potential production increase, causing a significant mismatch between supply and demand. Presently, the consumption of oil worldwide exceeds its discovery by 12 billion barrels per year. This results in high crude oil pricing and prospects for further escalation due to even minor disruptions in supply. Figure 1 demonstrates how fluctuations in market can be impacted by factors affecting both demand and supply.

With the increase in oil cost, there will be a surplus due to decreased demand. This is because petroleum products have an inflexible demand as gasoline is vital for vehicles. Although local oil production peaked in the 1970s, consumption still rises rapidly. The U

According to projections, S. will increase its daily oil consumption to 28.3 million barrels by 2025, marking a significant 44% increase from current levels. However, only 30% of this demand can be met through local production as shown in Figure 2. As a result, other countries will face increased competition from the United States.

As per a report by the Natural Resources Defense Council and Union of Concerned Scientists in 2002, developing nations are expected to increase their oil export spending, which will result in a rise from 15 million barrels per day to 32 million barrels per day over the next quarter-century. It is projected that by 2025, the global demand for oil will reach around 118 million barrels per day.

To meet this requirement between 2002 and 2025, there would have to be an additional production of over half its present total - or an extra 40 million barrels per day - on a worldwide scale. Despite being costly, the United States continues to heavily depend on oil.

The American economy's overreliance on oil was highlighted in 2004 when $72.5 billion worth of oil was sold overseas by the U.S.

The United States pays $390 million daily to foreign countries for oil, with half of this amount going to OPEC and 25 percent directed towards the Persian Gulf. There is a chance that a portion of this money may be reinvested back into the United States.

According to Stone's (2004) report, modern economic trends indicate that funds given to OPEC are unlikely to be reinvested domestically. These countries are experiencing substantial profits due to the surge in oil prices, with projected gains of $300 billion by year-end. Unfortunately, this rise in oil costs has detrimental effects on consumers such as increased expenses for goods and services, a weaker job market, and reduced stock prices. Economist Philip Verleger estimates that since World War II, rising oil costs have resulted in a 15 percent negative impact on the growth of the U.S. economy, leading to a loss of $1.

According to Roberts (2004), the United States' reliance on oil leads to economic losses every year, including unemployment, decreased productivity, and lower tax revenue. These losses are estimated to be between $297 billion and $305 billion. Additionally, there is an urgent need to address a shortage of $2 trillion.

According to Walsh (2004, p. 54), Arab OPEC countries supply the United States with

25% of their daily requirement, which amounts to 2.5 million barrels per day.

While the daily imports of oil are currently in existence, Middle Eastern nations have the potential to produce a high amount of oil due to holding two thirds of the world's established reserves. It is predicted that by 2025, OPEC will supply 46 percent while the Middle East will provide 36 percent of the world's oil. To address this situation, the Bush administration has developed a national power strategy aimed at forming closer political alliances and increasing management investment in Angola, Azerbaijan, Colombia, Kazakhstan, Mexico, Nigeria, Russia and Venezuela as alternative oil providers. However, these countries only possess a small portion of the oil reserves compared to those they aim to replace (Peterson, 2004).

The Middle East is the top producer of oil globally, according to petroleum resources by region. The region also holds the majority share of the one trillion barrels of identified oil reserves worldwide, with approximately 67 percent. This means that the Middle East plays a vital role in meeting global oil demands, and this influence is expected to continue expanding. The United States.

Iran's share of the established worldwide reserves is only 4 percent, in comparison to other countries. The production of oil in the region has been influenced by several key developments. In the 1970s and early 1980s, exploration and production received significant momentum due to high prices. However, a decline in demand for oil resulted in extended periods of low prices with even lower costs than those seen in 1986 experienced by 1998. During the early years of the 2000s, oil prices exceeded those observed during the Persian Gulf

crisis.

Although inflation was rapid, crude oil prices were more affordable in 2000 than their peak in the 1980s. However, purchasing power was less than half during this period. The United States accounts for about 60% of manufacturing in the entire American region and is the second-largest zone globally. Roberts (2004) noted that these countries have a total proven reserve amount of 198 billion barrels, which is significantly lower than the Persian Gulf's reserves by approximately 70%. Consequently, only three decades' worth of remaining reserves were available at production levels from 2003. In contrast, the Persian Gulf has almost one hundred years' worth of confirmed reserves at those same production levels. Despite being major alternative actor groups, all experience significant political and social instability while also being vulnerable to global terrorism. This makes it challenging for them to attract foreign investments necessary for promoting output.