International Oil Production Costs And Price Determinants Essay

1478 Words Nov 25th, 2014 6 Pages
International Oil Production Costs and Price Determinants
It is no secret that the global energy bubble will eventually burst and affect the lifestyles of nearly every person on Earth when it does. This leaves us with need to develop other means of energy for the future, but in the meantime, a challenge to develop new and increasingly creative ways to find other existing reserves; and with the former currently remaining too expensive to produce on a mainstream scale, the latter becomes all the more important. The US government has recently abolished certain moratoriums on drilling for oil, specifically those related to offshore drilling. However, a heightened demand does not necessarily go with this expansion of short run supply. Because of a slower than expected recovery from the economic crash of 2008, firms are not expanding at the same rate which they normally would be, meaning that the demand for oil is lower than usual because less inputs are required for the smaller amount of production taking place. When these conditions coincide, cartels such as OPEC can produce oil at marginally lower prices than smaller US producers can, pushing them out of business and causing greater job losses. It also presents an issue to larger oil companies as to whether it would be a profitable venture to expand operations given current costs that they face, further contributing to unemployment. As demand for oil shrinks due to a sluggish economic recovery and supply increases due…

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