Discuss the demand for and supply of crude oil in the world

Solution

The demand for crude oil in the world market in 2018 is close to 99.3 million barrels per day while the supply of crude oil available is 1.53 million barrels per day. There is a situation of shortage in 2018 as the demand is way higher than the available supply.

We shall see how an oil shortage due to excess demand affected United States. Let us take the 1973 oil crisis as an example.

The 1973 oil crisis was a result of OPEC nations issuing an oil embargo. The nations that took the hit were United Kingdom, United States, Canada, Japan and Netherlands. The oil price had risen to 4 times the actual price from $3 per barrel to $12 per barrel. The move had a severe effect on the global economy. The embargo was due to the involvement of US in the Arab-Israeli war or the Yom-Kippur War. To make matters worse the United States was facing a decline in domestic oil production during the 1970\'s. The shortage was due to the high oil prices in the global market which affected the overall supply in the US. The effect of oil price rise in the US was severe as it threatened the US energy security. Many industries were hit because of the crisis. Several oil companies had to find newer sources of oil supply. Some even going as far as the Arctic regions to rig oil. It was during the Nixon administration that the oil crisis happened. The US government asked the citizens to take part in the oil rationing program. There were long lines of people waiting at the petrol stations. The government had introduced the odd-even system of petrol supply. The odd-even system allowed for vehicles with odd-numbered license plates to purchase gas on odd numbered days and even numbered license plates on even numbered days. The Emergency Highway Energy Conservation Act limited the speed of vehicles to 55 mph so as to ensure more miles per gallon of fuel.

These are some of the effects of oil crisis due to shortage. This indicates the level of global dependency on oil. In the present day, however, we have several other forms of energy to supply for our needs. But oil still retains its value. Hence, it is aptly called liquid gold.