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Unformatted text preview: 8] E. Liu
Given the large scale of US purchases, incremental US acquisitions of oil affect its overall international market price. Stated
another way, the cost of each marginal barrel is higher than the price paid for that barrel, since this additional purchase
affects the costs of all oil consumed. From the perspective of the United States, this constitutes an externality.6 On the other
hand, the fact that the United States faces a rising supply curve for oil gives it monopsony power. To the extent that
America, or a group of consuming countries on a comparable scale, takes concrete actions to reduce the size of its
purchases, it can lower the market price of oil. This can happen by accident (as, in the past, through economic recessions)
or by sound public policy, which is the preferable path and the one Elhefnawy advocates. 53
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US Demand Key to World Oil Prices 54 Oil DDW 2012 1 US is an oil consumer now – decrease in demand results in exports
[Matthew Yglesias, economic correspondent for slate, former journalist for Atlantic and TPM Media
Some very exciting and cw-upending news was reported yesterday in The Wall Street Journal, where citing Energy
Information Agency data they say "U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation
on track to be a net exporter of petroleum products in 2011 for the first time in 62 years." Really? Before you get too
excited about this particular Slate pitch note that oil is not a "petroleum product." Petroleum products are fuels. Oil is the
stuff you make petroleum products out of. Iran is a net importer of petroleum products because it lacks the refinery capacity
to make all the fuel it needs. The United States may be becoming a net exporter of petroleum products thanks to increased
domestic capacity and surging foreign demand, but we're still a huge importer of foreign energy. The WSJ writes that "the
U.S. sent abroad 753.4 million barrels of everything from gasoline to jet fuel in the first nine months of this year, while it
imported 689.4 million barrels." But at the same time, we're importing about 9 million barrels of crude oil every single day.
Of course petroleum products are more valuable than crude oil, so it's possible in principle to be running a petroleum
surplus even while importing crude. But we're not. Here's a chart I made based on US Department of Commerce data of
America's net imports, in dollar terms, of petroleum: As you can see, we're importing. And we're importing a lot. In 2010,
oil accounted for about 20 percent of the total American trade deficit. And if increased demand abroad pushes oil prices
higher, that's only going to be worse news for a country like ours with extremely high per capita levels of oil consumption .
If America ever wants to become a net exporter, it's almost certainly the case that a large share of the adjustment
will have to come through decreased oil consumption. 55
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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.
- Spring '13
- The American, Saudi Arabia, Peak oil, Nuclear weapon, Oil prices