Consumption Rate of Oil

Oil and gasoline prices had been a problem since individual vehicles had actually entered the market. After the Katrina United States current economic growth is not even sustainable under the recent oil price surge. Even though the Department of Energy does not feel that oil prices are high enough to cause a recession, the consequence of high energy costs cannot go unaddressed.

Government has to start looking and actually spending money on solutions to this consumption problem immediately. This is the biggest problem driving United States economy to inflation.

It is proven by a fact that reducing the biggest consumption in the market would affect the aggregate demand graphs which would directly affect the economy negatively. So there should be other options to reduce the recession. Isn’t it true that finding new energy sources to take the place of oil use would reduce this problem?

High Oil Consumption in U.S. Constraining Supply

By Joseph D. Villalon

OPEC raised the price of crude oil in world markets in 1973. During this time the price of crude oil rose 50 percent. The result was a supple shock, reduced supply of gasoline, since crude oil is the major component used to produce gasoline. Countries around the world, including the United States experienced inflation and recession.

Many placed the blame squarely on OPEC for the ensuing problems with gasoline supply, but economists have blame policymakers for limiting the price that oil companies could charge for gasoline. In time, the price of oil declined about 10 percent a year and U.S. policy makers repealed the regulatory polices it had put in place to control the price of gasoline.

The recent surge in oil prices is due to a large amount of consumption, especially in the U.S. in which 25 percent of the world’s oil output is used. The increase in global oil consumption last year was the highest increase in nearly 30 years. A second reason for the rising oil price is that supplies are constrained coupled with the large consumption by countries such as the U.S., China and India.

Optimists argue that, when adjusted for inflation, oil prices are not near previous peak prices. Along with that argument is the opinion that oil is cheap and will not impact economic growth. This is a misconception when very high consumption on a sensitive supply is realized.

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