U.S. Oil Prices
Thesis: “The increasing oil prices in the
U.S are not only disturbing the local markets
but also fluctuating the international markets.
As a consequence, intense economical as well as
political impacts are resulting both domestically
as well as globally”
Introduction
Globalization has changed the traditional trends
of international relations as well as the conventional
ideological warfare has shaped to a modern and
sophisticated form. Prior to globalization, the
ideological clash was based on ideologies like
communism, totalitarianism, capitalism and fascism.
However, presently the ideological concerns are
more intense along the traditional concepts, as
states are now more intensely involved into technological
development and economic development. At the same
time, the traditional concept of power has changed
with the emergence of globalization. Now power
means to be equally developed in economic, political,
technological and social areas domestically as
well as possess a very strong potential to conduct
an influential role in international relations.
Globalization basically means privatization,
free market economy, trade liberalization while
bridging the communication gap among states all
over the world. However, globalization is now
leading to regionalism, as states are more concerned
to regional economic integration to strengthen
their economies.
Therefore, the world is now like a global village
where every country is affected by the policies
of other states at the same time the domestic
policies are not unaffected. However, the world
is much more affected by the economic as well
as technological and political policies of America
as it is the super power. For instance, the fluctuation
of the U.S oil prices not only disturbs the local
market of America but also the global market.
Lets have a brief analysis of the impact of the
U.S oil prices on the domestic as well as global
market.
U.S. Oil Prices: Effect On Local Market
Oil prices are directly related to all areas
of business, as it basically increases the cost
of production. Since the over all transportation
expenses increases from the period prior to the
production to transporting the various finished
products into the market and from there to the
local retailers. Consequently, the cost of production
increases, which leads to an increase to the selling
price and the decrease in the amount of profit
per products.
Therefore, the local market suffers more loses
as the ratio of consumer also decreases when the
prices of various products are high. Similar effects
are observed in the local markets of other countries
due to the global communication.
However, the oil prices has increased tremendously
since 1990’s as it was ranging between 10-25
during the 90’s while presently the oil
trading prices have increased to 40 and 60 per
barrel. Therefore, it is very important for the
American policy makers to realize that the commodity
prices are basically determined by the relationship
between the supply and demand of the oil prices
which also grows side by side to the in demand
growth.
On the other hand, the most debatable issue these
days is the principle causes leading to the increasing
oil prices. Some believe that the increase in
the price of crude oil results into the high oil
prices while others blame the domestic refining
and marketing sector to be responsible for the
rising oil prices in the U.S. Therefore, the rise
in the oil prices are influencing the competitive
domestic markets, where the long term strategic
decision making process and management are enjoying
benefits out of the weakness of the competitive
market forces, which is basically resulting due
to the increase in the U.S oil prices.
U.S Oil Prices and globalization
Amongst the various challenges resulting out
of globalization, economic globalization is leading
to a more intense situation as the world financial
crises is increasing day by day with a rapid transmission
from country to country. Where the domestic economic
impacts of various countries are at the same time
intense and are continuously growing due to these
challenges of economic globalization. Though,
the roots causes of such economic crises, both
domestically as well as globally, are related
to the fluctuating financial position of the foreign
exchange and the stock markets as well as the
economic volatility resulting in the instability
of the international commodity markets. Nonetheless,
all these are basically controlled by the U.S
oil prices.
Consequently, the ratio of demand and supply
in the international commodity market is directly
influenced by the fluctuation in the oil prices.
On the other hand, the ongoing wars and the previous
wars diplomatically and strategically instigated
and supported by the U.S are not due to political,
religious or any other reasons but for dominating
the oil market. For instance, the Crude Oil Market
Crises, which include the Arab Production Embargo
during the year 1973, the fall of the Shah of
Iran in 1979 and the invasion of Kuwait by the
Iraqi forces during the 90’s etc. etc. Therefore,
one can generalize the causes of these wars under
the shadow of U.S oil politics. However, the sophisticated
and modern tool of waging war under the shadow
of oil politics is tremendously effecting the
global as well as local commodity market of U.S.
On the other hand, it is strongly required to
realize the significant role of the global commodity
market, as it is high time now. International
commodity market not only provides a smooth medium
for the exchange of natural resources but also
opens new opportunities in the international market
for the commodity products.
Nonetheless, these include both agricultural
products like wheat, coffee and wine as well as
many other agricultural products that are raw.
For instance, cotton, rubber, lumber and marine
resources like fishes, lobsters, tuna, shrimp
etc. etc. At the same time the wide range of commodity
products also include metals, minerals and fuel,
which are all dependent on transportation as these
are related to international trade.
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