Oil Price Fluctuation & Its Effects on Macro-economics

8/4/2019 Oil Price Fluctuation & Its Effects on Macro-economics

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No one knows exactly how oil was created. But there

are two theories that explain how the substance mayhave originated.

I. Fossil fuel theoryit is composed of dead plantsand animals that lived hundreds of millions of

years agoII. Abiotic" theoryoil comes from near the earth's

core and flows like lava in the earths crust

Oil is traditionally measured in barrels, and 1 barrel =42 gallons.


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If Middle East is the center of the world's oil supply. The region sits ontop of a liquid gold mine - experts estimate 700 billion barrels of oil in itsvarious fields and reserves, or roughly 56% of all the world's resources.

The nation that has the most oil - in not just the Middle East, but the

entire world - is Saudi Arabia. The kingdom, also the spiritual home ofIslam, reportedly has more than 250 billion barrels.

The other Middle Eastern nations with sizable quantities all have aboutone-half of Saudi Arabia's reserves. They include Iraq, Iran, Kuwait andthe United Arab Emirates. In total, the region's vast supplies of oil make

them an integral part of the world economy.

Canada is the second-largest amount of proven oil reserves in the worldwith close to 200 billion barrels within its borders.


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Before oil can be used, it has to be broken down in aprocess known as "refining." After being purchased, oilis shipped to various refineries around the world.

In America, many (but certainly not all) of the oilrefineries are located in the Gulf Coast region. This is areason why oil costs tend to fluctuate during stormseason

A large hurricane, for example, puts oil supplied at therefineries at risk of destruction. (Oil companies areoften synonymous with environmental problems inmany people's minds.


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It may shock you to learn which country has thesecond-largest amount of proven oil reserves in theworld.

The answer is Canada, which has close to 200 billionbarrels within its borders.

However, much of these reserves are located inAlberta's "sand pits", a terrain that makes the oil harder

to extract from the earth than it is in other countries. However, technological innovations are expected, over

time, to make extracting oil located in this kind ofterrain easier.
http://www.investopedia.com/terms/o/oilsand.asphttp://www.investopedia.com/terms/o/oilsand.asp


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It makes sense that the world's biggest economies would usethe most oil. America, which has the world's biggest grossdomestic product (GDP), also consumes more oil than anyother nation.

The U.S. uses 25% of the estimated 80 million barrels of oil

produced around the world every day. The phrase "America's dependence on foreign oil" is

mentioned often in the media, particularly in reference toAmerican imports from the Middle East.

However, this statement doesn't accurately tell whosupplies the United States. About 34% of all of theoilAmerica uses comes from reserves found in the 50 states.

The country that exports the most oil to America isCanada, with Saudi Arabia second.
http://www.investopedia.com/terms/g/gdp.asphttp://www.investopedia.com/terms/g/gdp.asphttp://www.investopedia.com/terms/g/gdp.asphttp://www.investopedia.com/terms/g/gdp.asphttp://www.investopedia.com/terms/g/gdp.asphttp://www.investopedia.com/terms/g/gdp.asp


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Canada has the tenth largest economy in the world[4] (measured in USdollars at market exchange rates), is one of the world's wealthiest nations,and is a member of the Organization for Economic Co-operation andDevelopment (OECD) and Group of Eight (G8).

the Canadian economy is dominated by the service industry, whichemploys about three quarters of Canadians

Canada is unusual among developed countries in the importance of theprimary sector, with the logging and oil industries being two of Canada'smost important. Canada also has a sizable manufacturing sector, centeredin Central Canada, with the automobile industry especially important.

International trade makes up a large part of the Canadian economy,particularly of its natural resources. In 2009, agricultural, energy, forestryand mining exports accounted for about 58% of Canada's total exports[10].

Machinery, equipment, automotive products and other manufacturesaccounted for a further 38% of exports in 2009[11]. In 2009, exportsaccounted for approximately 30% of Canada's GDP. The United States isby far its largest trading partner, accounting for about 73% of exports and63% of imports as of 2009.[12] Canada's combined exports and importsranked 8th among all nations in 2006.[13]
http://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/G8http://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/G8http://en.wikipedia.org/wiki/Tertiary_sector_of_industryhttp://en.wikipedia.org/wiki/Primary_sector_of_industryhttp://en.wikipedia.org/wiki/Logginghttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Primary_sector_of_industryhttp://en.wikipedia.org/wiki/Logginghttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Central_Canadahttp://en.wikipedia.org/wiki/Automakerhttp://en.wikipedia.org/wiki/Central_Canadahttp://en.wikipedia.org/wiki/Automakerhttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Automakerhttp://en.wikipedia.org/wiki/Central_Canadahttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Logginghttp://en.wikipedia.org/wiki/Primary_sector_of_industryhttp://en.wikipedia.org/wiki/Tertiary_sector_of_industryhttp://en.wikipedia.org/wiki/G8http://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/Organization_for_Economic_Co-operation_and_Developmenthttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Canada


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The relatively large reliance on natural resources has several effects on theCanadian economy and Canadian society. While manufacturing andservice industries are easy to standardize, natural resources vary greatlyby region. This ensures that differing economic structures developed ineach region of Canada, contributing to Canada's strong regionalism. Atthe same time the vast majority of these resources are exported,integrating Canada closely into the international economy.

Canada is also one of the world's highest per capita consumers ofenergy.[16][17] Cheap energy has enabled the creation of several importantindustries, such as the large aluminum industry in Quebec, Alberta andBritish Columbia.

Historically, an important issue in Canadian politics is that while WesternCanada is one of the world's richest sources of energy, the industrial

heartland of Southern Ontario has fewer native sources of power. It is,however, cheaper for Alberta to ship its oil to the western United Statesthan to eastern Canada. The eastern Canadian ports thus importsignificant quantities of oil from overseas, and Ontario makes significantuse of nuclear power.
http://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Aluminumhttp://en.wikipedia.org/wiki/Aluminumhttp://en.wikipedia.org/wiki/Western_Canadahttp://en.wikipedia.org/wiki/Western_Canadahttp://en.wikipedia.org/wiki/Western_Canadahttp://en.wikipedia.org/wiki/Nuclear_power_in_Canadahttp://en.wikipedia.org/wiki/Nuclear_power_in_Canadahttp://en.wikipedia.org/wiki/Nuclear_power_in_Canadahttp://en.wikipedia.org/wiki/Western_Canadahttp://en.wikipedia.org/wiki/Western_Canadahttp://en.wikipedia.org/wiki/Aluminumhttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canada


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In times of high oil prices this means that the majority of Canada'spopulation suffers, while the West benefits. The National Energy Policyof the early 1980s attempted to force Alberta to sell low priced oil toeastern Canada. This policy proved deeply divisive, and quickly lost itsimportance as oil prices collapsed in the mid-1980s. One of the mostcontroversial sections of the Canada-United States Free Trade Agreementof 1988 was a promise that Canada would never charge the United Statesmore for energy than fellow Canadians.

Canada is also one of the world's largest suppliers of agriculturalproducts, particularly of wheat and other grains.[18] Canada is a majorexporter of agricultural products, to the United States but also to Europeand East Asia.

Central Canada is home to branch plants to all the major American and

Japanese automobile makers and many parts factories owned byCanadian firms such as Magna International and Linamar Corporation.Central Canada today produces more vehicles each year than theneighboring U.S. state of Michigan, the heart of the American automobileindustry.
http://en.wikipedia.org/wiki/National_Energy_Policyhttp://en.wikipedia.org/wiki/National_Energy_Policyhttp://en.wikipedia.org/wiki/Canada-United_States_Free_Trade_Agreementhttp://en.wikipedia.org/wiki/Canada-United_States_Free_Trade_Agreementhttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Branch_planthttp://en.wikipedia.org/wiki/Magna_Internationalhttp://en.wikipedia.org/wiki/Linamarhttp://en.wikipedia.org/wiki/Magna_Internationalhttp://en.wikipedia.org/wiki/Linamarhttp://en.wikipedia.org/wiki/Michiganhttp://en.wikipedia.org/wiki/Michiganhttp://en.wikipedia.org/wiki/Michiganhttp://en.wikipedia.org/wiki/Linamarhttp://en.wikipedia.org/wiki/Magna_Internationalhttp://en.wikipedia.org/wiki/Branch_planthttp://en.wikipedia.org/wiki/Economy_of_Canadahttp://en.wikipedia.org/wiki/Canada-United_States_Free_Trade_Agreementhttp://en.wikipedia.org/wiki/Canada-United_States_Free_Trade_Agreementhttp://en.wikipedia.org/wiki/Canada-United_States_Free_Trade_Agreementhttp://en.wikipedia.org/wiki/National_Energy_Policy

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Oil Price Fluctuation & Its Effects on Macro-economics