Oil Crisis

Paper Summary:

In this article, the writer explains that once the peak point of oil harvesting is reached, economic laws will become painfully evident to even the staunchest defenders of oil use. The writer points out that the supply is literally diminishing, and no amount of politics will be able to create more oil to fulfill the demands that the consumers of the world currently have for energy. Further, the writer notes that alternate supplies of energy in another form are not readily available and therefore, the oil which is available has become increasingly precious to consumers who demand it and are willing to pay a premium amount for the product.

From the Paper:

"In terms of economic concepts, peak oil refers to the tipping point when demand begins to exceed supply. Economist Alfred Marshall explained the relationship that supply and demand have with one another rather succinctly when he described the two factors in pricing as separate blades of a scissors in that their intersection was the point of price, and that neither could influence the other without the presence of the second blade. Applied to the oil market, the demand for the product is evident, most of the world depends on fossil fuels for energy; despite the skyrocketing gas prices of recent months, consumers in the United States appear to have a high tolerance for the prices, since demand for oil and gasoline has remained at high levels."

Sample of Sources Used:

• Fletcher, Pascal (2004) "Venezuela would stop oil to U.S. if invaded -Chavez", Forbes.com 2/29/04, available at http://www.forbes.com/business/newswire/2004/02/29/rtr1280446.html
• Hubbert, M.K. (1956). Nuclear Energy and the Fossil Fuels. Presented before the Spring Meeting of the Southern District, American Petroleum Institute, Plaza Hotel, San Antonio, Texas, March 7-8-9, 1956
• Rupert, Mark and Rapkin, David "The Erosion of U.S. Leadership Capabilities," in Paul M. Johnson and William R. Thompson, eds., Rhythms in Politics and Economics (New York: Praeger, 1985)
• Whitaker, J.K. (ed.) (1990) Centenary Essays on Alfred Marshall, Massachusetts: Cambridge University Press.

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