Verified Document

Current Macroeconomic Issue Term Paper

¶ … oil shock (like the one now looming as a result of the impending war with Iraq) will affect the United States economy. War with Iraq is imminent. While any degree of instability in the Middle East region is reason enough to worry, when one couples this reality with the fact that Saddam Hussein is widely considered to be unstable, the recipe for disaster is compounded many-fold. Unfortunately for the United States, this disaster will not be contained to the immediate region of the Persian Gulf. The oil supply disruption that is sure to follow the launching of an attack by American troops will reverberate throughout the world and will hit the U.S. economy especially hard because of its high dependence on this fossil fuel.

Synopsis of Issue

To get some kind of perspective on this issue, consider the extent of the known oil reserves in Iraq. According to reliable estimates these reserves alone "could cover current U.S. imports for almost a century." Now add to this vast reserve the 220 billion barrels of oil that may still be under the ground in Iraq (Zagorin, 2003, p. 32). If forced into a corner, Saddam could sabotage these very reserves as well as the oil fields of his neighbors. In this scenario, "a major shortfall of up to 6 million bbl. A day - 8% of world consumption...

33). This type of a cut in supply would send such a shock through the oil market that prices could hit $80 per barrel before the situation could be brought under control (Zagorin, 2003, p. 33).
Macroeconomic Effect on the National Economy

The relevance and currency of this issue is clear. The only question which needs to be addressed is: "How will an oil shock like the one described above affect the United States Economy?" For starters, the U.S. is highly dependent on imported oil. While in 1973 imports of oil were 35% of total consumed oil, by 2000 this percentage had increased to 50%. Some economists expect that by 2020 this will be 64% (Energy, n.d., p. 1). Therefore, unless the politicians in Washington decide to allow development in Alaska (or scientists develop a truly viable energy alternative), the United States will be dependent on foreign oil for the foreseeable future. With this in mind, the remainder of the paper will deal with the two types of macroeconomic costs for the United States as a result of high oil prices: higher inflation/interest rates and decreased output/consumption.

Starting at the most basic level, when oil prices go up so do everyday prices of gas and heating oil. This increase will eventually show up in…

Sources used in this document:
References

Energy Price Impacts on the U.S. Economy (n.d.) Retrieved February 12, 2003 at http://www.eia.doe.gov/oiaf/economy/energy-price.pdf.

Huntington, H.G. (1998) Crude oil prices and U.S. economic performance: Where does the asymmetry reside? The Energy Journal, Vol. 19, Issue 4. Retrieved February 12, 2003 from (http://www.iaee.org/documents/vol_19" target="_blank" REL="NOFOLLOW" style="text-decoration: underline !important;">http://www.iaee.org/documents/vol_19(4).pdf.

Pindyck, R.S. (1980) Energy Price Increases and Macroeconomic The Energy Journal, Policy

Vol 1 Issue 4 Retrieved February 12, 2003 at (http://www.iaee.org/documents/vol_1(4).pdf
Cite this Document:
Copy Bibliography Citation

Related Documents

Macroeconomic Conditions the Real State
Words: 580 Length: 2 Document Type: Essay

S. government uses are the tax rolls. To further define this further, any analysis should consider present tax rolls as compared to their classical 1930's Great Depression era equivalents. What gives the issue an even more ominous pessimism is that we now have a garrison effect to our economy that Franklin Delano Roosevelt did not have to deal with, that is concurrent land wars in Asia and Africa. Tax Rolls-It looks

Macroeconomic Subject and How It
Words: 1649 Length: 5 Document Type: Term Paper

With Iraq opened up, companies from the U.S. could benefit from an expanding market, with natural resources and qualified, cheap labor. The result is, however, that the current security environment is unstable, which means that the U.S. companies are only benefiting in a limited manner from the potential advantages of the market. As a conclusion and result of the cost-benefit analysis, it seems that the war in Iraq had, in

Macroeconomic and International Trade Analysis
Words: 2139 Length: 8 Document Type: Term Paper

Note: current prices values are expressed in AUD billion. Australia's Trade Situation In the June quarter 2007, Australia's exports of goods and services increased by 0.5%, reaching the value of $54.6 billion. This increase follows a series of increases, as for the 2006-2007 financial year, exports increased by 10%, reaching $216 billion. Regarding the volume of Australia's exports of goods and services, it increased by 0.8% in the June quarter of 2007,

Macroeconomic and Microeconomics Differences With Examples: Microeconomics...
Words: 935 Length: 3 Document Type: Term Paper

Macroeconomic and Microeconomics Differences With Examples: Microeconomics and Macroeconomics are two separate branches of the same field, economics. Together they help us better understand the market dynamics and economic forces that shape them. Macroeconomics deals with the aggregate performance of the economy, the industries and discusses such serious issues as inflation, unemployment and growth. Microeconomics on the study hand is solely concerned with the smaller picture. It is mainly concerned with

Macroeconomic Analysis and Comparative Stock
Words: 897 Length: 3 Document Type: Research Paper

In terms of size, the largest stock market is, by far, represented by NYSE, which trades the highest volumes of shares and which has the highest value of the transactions. The New York Stock Exchange and the Brazilian Exchange are both companies created as a result of mergers between two other entities, namely Sao Paolo Stock Exchange and the Brazilian Mercantile and Futures Exchange in the case of BM&F Bovespa

Unemployment Is a Significant Issue
Words: 4560 Length: 15 Document Type: Research Paper

This is what has led to so many foreigners working in the country already. The foreign workers are therefore a symptom of a greater problem. This problem is not macroeconomic failure -- the Saudi economy is robust and creates jobs -- but is simply does not recognize that macroeconomic principles alone will not address the issue of unemployment among Saudi nationals. Consider the case of China as corollary. In both

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now