Impact of Oil Industry on Economic

Economic Impact of the oil Industry

When Edwin Drake dug the first oil in 1819 to extract kerosene for lighting , little did he know that oil would become a primary source of energy and a billion dollar industry . Today , the world lives on oil . It remains a key component of industrialized countries and a variable in economic growth . Oil supplies two fifths of the world 's energy needs . It is the foundation of major industries and the lifeblood of modern civilization . Produce in 123 countries , oil is a great source of raw

materials for gasoline , liquefied petroleum gas , insecticides , ethylene methanol , plastics , synthetic fibers and rubbers , detergents and chemical fertilizers among others . It has thousands of uses and it would not be easy to live without it . That is why it is a very profitable industry

Since 2004 up to the third quarter of 2006 , the world consumes a regular 82 .5 million barrels a day according to the International Energy Agency (IEA . The Organization of Petroleum Exporting Countries (OPEC , on the other hand , forecasted that oil demand would increase to 90 .6 million barrels a day by 2010 and 103 million barrels a day by 2020 . The United States is the largest oil consumer with 21 million barrels a day , eating up 25 percent of global demand while the transport sector takes in 54 percent in oil consumption

Huge Profits . For every dollar sold , the oil business earns 8 .2 cents compared to the 6 .8 cents for other US industries . This is the average profit margin of the industry . As of March 2006 , one barrel of oil is 57 .57 but it could rise to 60 or even 70 according to analysts . For every one barrel of crude oil , 19 .5 gallons are for gasoline , 9 gallons for fuel oil , 4 gallons for jet fuel , and 11 gallons for other products such as lubricants , kerosene , asphalt , and petrochemical feed stocks to make plastics . As you can see , the industry has many sources of revenue in just a barrel of oil . When oil price began to rise in 2004 , the oil industry likewise enjoyed huge profits . Another factor in oil hike price is the lack of refineries to meet the demand for petroleum products Price increase means that consumers ' money is transferred to the oil industry that becomes added revenues . Last year , US gasoline consumption reached 320 ,500 ,000 gallons per day multiply that by 1 .5 per gallon would give you 480 ,750 ,000 in income . This year at 2 .50 per gallon oil companies will be enjoying an increase of earning up to 801 ,250 ,000 assuming the same rate of gasoline consumption . Generally , an increase in oil prices occurs when the demand also increases , shortage of supply higher taxation , natural disasters , higher tanker rates , bad weather and wars in producing countries especially in the Middle East . Most profits do not come from the upstream operations (exploration development , and production ) of the industry but in the downstream...