How Oil Prices Affect the Economy

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Key Points:

• Crude oil was once an abundant resource. A byproduct of processing crude oil is gasoline. At first gasoline wasn’t used…until engineers developed engines that could run off them. This contributed to the Second Industrial Revolution.
• The United States is highly dependent on crude oil not just to fuel cars and planes, but for everyday products. Even food production is dependent upon oil (those giant tractors need to be fueled somehow)!
• There is still a lot of oil left in the earth, but the global population is exploding…meaning that the remaining oil is being used up more quickly than ever before.
• When the economy is doing well, we are moving more and producing more – which means we are using more oil and thus the price of it goes up. Since oil is so necessary for basically everything, when its price goes up, the price of everything goes up.
• When the price of everything goes up, we move less, buy less, and produce less. That makes the economy slow down.
• Oil is the lifeblood of the U.S. economy. Every time we try to work ourselves out of a recession, the price of oil rises. The solution, then, is for the U.S. to free itself from dependency on oil by developing new technologies and strategies that remove crude oil from the equation. This will be called the New Industrial Revolution.

Quote This:

A century ago, petroleum – what we call oil – was just an obscure commodity; today it is almost as vital to human existence as water. -James Buchan

See Also: Culture, Economy, Politics