30 March 2010
The world functions on a cheap, abundant natural resource. As this resource is depleted it becomes more expensive and new reserves become harder to find. This lifeblood that the world operates on is oil. As oil production declines, new sources of energy will be needed for continued world economic growth. As the price of oil begins to rise, it has a rippling effect throughout our economy; in order to lessen the impact to our economy the U.S. needs to research and develop alternative fuel sources.
It does not take much thought for one to see how important oil is in modern life. There are many products produced from refined crude oil. These include; kerosene, which is used in lamps and jet fuel; gasoline and diesel, which is used to power automobiles and heavy equipment; industrial fuel, used to power electrical plants; and asphalt base, used in the construction of roads. Other products made from oil include plastics, make-up, lubricants and many more household and industrial goods. Therefore anyone with basic knowledge of economics will realize the effect higher oil prices have on the economy as a whole. It is called cost-push inflation; rising oil prices would increase per unit production cost, which in turn would increase the price charged for all final products. Since oil is such an important part of the economy the rising oil cost would cause a rise in cost for all other goods too.
The first major oil discovery was in 1859 in Titusville Pennsylvania. At the time the crude oil was refined for the kerosene, used to light lamps (Solberg 8). The introduction of electricity left little use for lamps, but oil was still used as fuel to power electric plants that produced electricity. Then with the invention and mass production of the automobile, gasoline became the primary fuel to power automobiles. Sixty years after its discovery oil became the lifeblood of the United States. By 1920 the Navy consumed...