One way to do it is to use their oil wealth as a

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Unformatted text preview: the financial sector and reducing its dependence on commodities materials. One way to do it is to use their oil wealth as a means to justify reform. Current geopolitical events are supporting high oil prices, mainly problems in Libya and Syria, and a new oil embargo against Iran. Ria Novosti also noted in its report that Iraq was contributing to high oil prices as well. As U.S. troops head home, some oil firms are looking at the security risks there and wondering if it is worth maintaining current projects. Russia’s government is expecting that the Iran oil embargo will contribute to a 10%15% rise in oil prices, including the possibility of Iran closing the Strait of Hormuz, an important oil route in the Middle East. 13 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 Russia 1NC 14 Oil DDW 2012 1 Investing in alternative transportation infrastructure lowers oil demand Konrad 1/26/12 [Tom Konrad, energy contributor to Forbes, editor at Alt Energy Stocks, http://www.forbes.com/sites/tomkonrad/2012/01/26/the-end-of-elastic-oil/3/] World oil demand’s very significant response to changes in the oil price implies that demand is now playing a much bigger role in the adjustments the oil market makes to changes in price than it has in the past. Because oil supply has become less elastic and less responsive to changes in price, oil prices have become much more volatile in order to force market adjustments. The chart below shows that while the magnitude (either up or down) of annual changes in supply and consumption have been in the 3% to 7% range for the last quarter of a century, the magnitude of oil price changes has been rising relentlessly. In the 1990s, oil prices usually changed by an average of 25% or less per year, while they now typically change by three or four times that amount in any given year. If the price elasticity of the oil market had not been falling over time, the increasing magnitude of changes in oil prices would have produced a similar increase in the magnitude changes in oil supply and demand. As the Market For Oil Becomes Less Flexible, We Should Make the Market for Transportation Services More Flexible to Compensate If what we care about are the effects on the economy, it does not matter how much oil is in the ground. Over the last ten years, we have see a structural change in the oil market which will continue to have far-reaching effects on the economy even if we manage to increase the amount of oil produced. Before 2000, oil supply did the heavy lifting when it came to balancing supply and demand in the oil market. That is no longer the case, and the oil price signal has grown significantly stronger in order to elicit a response in demand. With 2% of the world’s oil reserves, changes in the US supply of oil will remain insignificant in the world oil supply demand picture, developments in the Bakken shale and cheer leading from political leaders notwithstanding. On the other hand, as the consumer of a quarter of the world’s oil supply, we can have a significant effect on the world oil market by making sure...
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This note was uploaded on 01/30/2013 for the course ECON 101 taught by Professor Burke during the Spring '13 term at Southern Arkansas University.

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