Oil Prices increasing in the United States
“It is quite easy to moan and curse when gas becomes expensive. Oil companies are persistently abusing the helpless consumers who are indentured to them effectively, and can put their own prices thanks to the system of profiteering and collusion. Something, most probably involving legislation, should be done. A major demand-supply imbalance coming from oil has been witnessed in the United States. The demand of oil in the country has increased by 1.64 million barrels a day to an approximate of one hundred million barrels a day in this year, this is according to estimates by the OPEC CITATION Kim18 l 1033 (Amadeo). This is indeed a problem facing all oil consumers in the United States who require to use gas on a daily basis. Well ,what has caused this increase in price of oil? The primary factors that have affected the prices of oil are
Demand and Supply
Demand refers to the amount in which consumers are willing and are able to purchase at a given point in time. On the other hand, supply refers to the amount in which suppliers are willing and able to supply at a given period of time. Well, the supply and demand are an economic model that determines prices of commodities in a market. It is very clear to us that in competitive markets, unit prices for goods vary due to many reasons. The number of oil consumers has rapidly increased in the United States this means that the demand for oil has gone up, an increase in demand for oil and an increase in prices are directly related, thus the increased prices of oil. Conversely, many oil producing companies such as the OPEC which is the leading oil producing Company in the United States, have stated that the cost of producing oil has increased, this would only mean that they price of oil will increase.
The other main factor that has led to the increased prices in the United States is sentiment. The mere belief that the demand will increase dramatically at a given point in the future has led to the dramatic increase in prices. It is expected that the demand of oil in the country will increase to 100.26 million barrels a day in the year 2019 CITATION Ker18 l 1033 (Lahiff).Most oil suppliers have then opted to increase the prices of oil now anticipating the increase in demand for next year. Oil prices increasing have increased burden to the middle-class individuals and the poor in the United States, and this problem could get worse if no appropriate measures are put in place. Some solutions can include;
The US government intervening and increasing subsidies on some production processes to reduce production costs by oil companies.
The government introducing laws and policies that will prevent oil companies from increasing oil prices abruptly without appropriate reasons to.
Importing cheap oil from developing countries from the Middle East.
Introducing other sources of energy that will act as substitutes of oil.
Concisely, it would benefit all US citizens if the appropriate measures would be taken to reduce the oil prices in the country. Nearly all households, industries and work places use oil in one way or the other. The increased oil prices have greatly affected the middle class and the poor in the country thus, it is important for the government to undertake measures that strive at lowering oil prices. In addition, reducing prices would benefit the country as a whole. This is because, the prices of other commodities would reduce, lower prices for oil and oil products would also increase exports which would increase the country’s Gross Domestic Product. Thankyou!”
BIBLIOGRAPHY l 1033 Amadeo, Kimberly. Oil Price Forecast 2018 – 2050. How Oil Prices Could Rise Above $200 a Barrel. 20 October 2018. 23 October 2018. <https://www.thebalance.com/oil-price-forecast-3306219>.
Lahiff, Keris. Oil prices could see a spike from a coming supply-demand imbalance, expert predicts. 8 September 2018. 23 October 2018. <https://www.cnbc.com/2018/09/08/a-major-supply-demand-imbalance-coming-for-oil-could-spike-prices.html>.