Over the past couple years the price of oil has gone from over $100 per barrel to, at times, less than $30 per barrel. This has had profound effects all over the world. Join Active Minds as we explore the causes and consequences (positive and negative) of this dynamic. We will cover the role of China, the impact of fracking and the oil sector in the U.S., as well as the role of OPEC in addressing the fluctuating price of this commodity so crucial to the global economy.
Key Lecture Points
- Although a commodity that humans have been aware of and have made use of for hundreds of years, oil came to be a central part of human endeavor with the coming of the industrial age, first as a source of lighting fuel, and later as a source of energy in the 19th century industrial revolution.
- The first major US oil discoveries were in Pennsylvania in 1859, Spindletop in Texas in 1901 and in California around Los Angeles in the 1920s. The major driver of US oil production came to be John D. Rockefeller’s Standard Oil. Before it was forced to break up in 1911, Standard Oil controlled as much as 90% of the US oil market.
- Although the US was initially the world’s foremost producer of oil, after WWII, global oil production increasingly came from other sources, particularly developing nations in the Middle East. Many of those nations came together in 1960 to form OPEC to coordinate and unify petroleum policies in order to secure fair and stable petroleum prices.
- Post-war oil crises included the first Iranian Oil Crisis of 1951-53 when the Iranian Parliament nationalized oil, the OPEC oil embargo after the 1973 Yom Kippur War and the second Iranian energy crisis in 1979 after the Iranian Revolution.
- US dependence on foreign oil peaked in 2005; in that year the US imported about 60% of the oil it consumed. By 2015, however, only 24% of the petroleum consumed by the US was imported from foreign countries—the lowest level since 1970. Less dependence on foreign imports is due to increased fuel efficiency; increased use of domestic biofuels and natural gas; and an expanded domestic supply due to hydraulic fracturing.
- Since 2014, global oil markets have experienced a significant decrease in demand, driven particularly by decreased Chinese imports, as that nation sees its economy slow. That, combined with increasing global supply (including US supply) has created a world-wide oil glut that has driven the price of oil down drastically. While this decrease has meant cheaper fuel prices, it has also triggered crises in oil-reliant economies in the US and abroad.
- Describe the historical forces that made oil the dominant energy form of the 20th century.
- What factors affect oil prices? How has oil influenced US foreign relations?
- Do you think the US will reach total energy self-sufficiency? Why? Why not?
- Do you think that cheap oil prices are a good thing? Or do the consequences of cheap oil outweigh the benefits?
More to Explore
Books For Further Reading
- Aguilera, Roberto, Marian Radetski. The Price of Oil. Cambridge University Press, 2015. 254 pages. This book examines the economics of oil.
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- Doran, Peter B. Breaking Rockefeller: The Incredible Story of Ambitious Rivals Who Toppled an Oil Empire. Viking, 2016. 352 pages. The author tells the true tale of how ambitious oil rivals Marcus Samuel, Jr. and Henri Deterding joined forces to topple the Standard Oil empire.
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- Gold, Russell. The Boom: How Fracking Ignited the American Energy Revolution and Changed the World. Simon & Schuster, 2014. 366 pages. The author, an investigative reporter for the Wall Street Journal, discusses how fracking has upended the oil business and the global economy from the perspectives of geologists and drillers to speculators and environmentalists.
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