The Oil Industry
Shawn K. Gore
Axia College of University of Phoenix
ECO 205 Economic Theory
October 12, 2008
Going through the ages, men and women have worked together with the intent centering on survival. Humanity created basic economies through rising wealth’s and a desire to keep clean and functioning societies. The word economy derives from the Greek, which means to manage one’s household (American Heritage Dictionary, 2000). According to the Axia College Week One reading, Principles of Economics (2008), economics focus on the ways, in which societies manage their available resources. As societies grew and focused on newer and stronger industries to strengthen their economies, the world turned to oil to help cater in the industrial age well into the future.
The oil industry does not have an exact date when one man found oil first. However, oil in the Middle East has routes going back thousands of years. American oil usage has routes back to the original colonies, but did not become a major industry in the economy until Edwin Drake constructed the first oil derrick in 1859. For years, humankind utilized oil as a lubricant, adhesive, or for medicinal use. The rise in oil refining for gasoline consumption ushered the world into the technological and industrial ages.
The early days of oil were opposite from today in that supplies were greater than demand. Rising demand for oil led to an increase in supplies, which brought on price hikes that would affect demand. Is pricing the only economic affect to the oil industry? No, the economy affects the oil industry in the following areas: price elasticity of supply and demand, negative and positive externalities, wage inequality, and energy policies.
Price Elasticity on Supply and Demand
The first day that humanity discovered oil, men and women have used oil for heat, food preparation, and to run machinery. Per Axia College’s Week One reading,...