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Custom The Impact of Oil on the US Economy essay paper sample

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The United States has many areas that require the use of oil. Transportation in the U.S highly depends on oil. The factories solely depend on oil for the manufacturing of its products. Production of food, clothes, and cars highly depends on the availability of oil. This means that if oil lacks even for a moment there will be a shortage. The Congress of the United States, (1994) advices that there should be an alternative to enhance availability of oil.

According to Painter, (1985), currently the U.S uses up to 19.6 million barrel per day. This is about 25 percent of the world total oil consumption per day. Due to the increase in population every day, there is a likely hood to have an increase in the demand of oil in America. The rate of consumption is currently at 2 percent every year. The United States has been in the past producing its own oil. However, as demand rose, they stated importing oil to meet their demand. In 2000, they imported about 10.9 million barrels of oil. This was 57 percent of the total consumption of oil. They imported oil from Canada, Venezuela, Saudis Arabia, and Mexico.

Leinberg, (1985), highlights that there are several reasons as to why the oil price is always rising. The world market for oil is facing challenges as the demand for oil has risen worldwide. Countries like India and China have lately been having high consumptions of oil. This is due to the upcoming industries in these countries. The wars stuck between the United States and Iran has caused less supply of oil to the country. Iran is one of the largest oil producing countries United States oil-producing parts seem to be reducing the oil every day.

According to Heinberg, (2005), the rise in prices affected every sector in United States. It affected food, transport, and production companies. Yet the price is still on the rise every day. The price is currently one hundred dollars. This will in turn make the prices of other services rise. In addition, it will cause a rise in raw materials. Despite the constant alarms given by economist about the dangers of raising the price of oil, it has been noted that the pride is still on the rise. Many have also complained that the rise in raw material will in turn affect their businesses. However, when the oil price rises, people can opt to use other means like the use of bio oil, which is cost effective.

The rise in prices will immediately affect buying price of gas. Air tickets will be expensive. Many people usually warm their house during winter. There is need for enough fuel for this. Many people will be spending a lot of money in warming their homes. Farmers that depend on the use of tractors will have to change strategy or succumb to the rise in price. This effect on the common people will in turn be felt in the whole economy of the United States. Because people will be spending more on fuel, and gas, and omit buying of other products and services.

The continuous rise in price of oil will cause a great demand in oil. The government will then have to import oil from other countries to cover the gap. According to  Fieldstein, (1980). United States had imported 253 million dollars of petroleum-related products. They only exports 49 billion dollars of petroleum-related products. These products include natural gas, crude oil, kerosene, and fuel oil. The deficit also was in the auto industry and consumer products. There were only 253 billon dollar imports and 150 billion dollar exports. The automotive industry was equally affected. In 2009, the imports were 160 billion dollars worth of auto parts, cars, and trucks.  They only exported 81 billion dollars.

The United States is the major exporter in the world market. This means if the United States does not export then there is a deficit of goods and services. This immediately affects the economy of the country; it also affects the economy of the whole world. Since, it has great influence in the world market. The deficit that is because of less production of goods and exports has a great role to play in the economy of the country. If there is low export and high import, this means that the country goes in to dept. The government will be importing on dept. This chain affects the value of the dollar.

Oil is sold universally; hence, it is bought in all kinds of currency. However, we notice that it has affected the dollar. Lovins, (2004), says that value of the dollar has lately dropped. When the price of oil rises, demand for oil is affected. The immediate reaction is people are to shunning from buying oil. Those that keep on purchasing oil will lower their expenditures. As a result, some goods will have a low demand than others. This will lower use of the dollar. Many will not be buying as much as they used to. The low use of a certain currency is what lowers its value. Therefore, value of the U.S dollar will depreciate. Depreciation of the dollar in turn affects the economy of the whole country. In the end, no much revenue comes in. The depts. that will have been made by suppliers will be demanding a repay. This again leads to the rise in taxes so that the government can pay back.

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