Oil is the most sought-after commodity in the world. Many countries are at war because of it, while others have broken down in civil wars after discovering it within their borders. The burning of this commodity for the production of energy also leads to the emission of greenhouse gases. Consequently, many people advocate for the cessation of oil production and the banning of petroleum products. They quickly forget that oil has many benefits to offer them, the people around them, and the economy. Here are the top 3 reasons that oil and gas production are critical to the economy.
- Providing Income and Employment Opportunities
The oil industry employs people in various sectors including marketing, transportation, refining, extraction, and exploration. For example, employees in upstream activities include engineers, seismic testers, and rig operators among others. They are critical to producing and exploring oil. Downstream workers such as wholesalers and retailers are vital to the oil industry as well. In the United States, more than 1.39 million people work in this industry. ExxonMobil alone employs 73.5 thousand individuals worldwide. It is worth noting that these people rely on services and products that others have built to facilitate their work. For instance, Greasebook is a software company that develops apps to improve the efficiency of the oil production process. That means thousands of people earn their living through the work that they do in the oil industry or for it. This work contributes to national economies as well. Just to give you context on how important it is, the gas and oil industry accounts for 8% of the US’ GDP.
- Stabilizing the Price of Essential Commodities and Services
Inflation refers to an increase in the aggregated price of commodities in a particular country over an extended period. For example, the rate of inflation in the US in January 1970 was 6.18%. Regrettably, it had risen to 13.29% by December 1979. The impact of this rise in inflation was profound. The price of utility bills and groceries rose steadily, while average wages remained stagnant. The cause of this inflationary pressure was a worldwide increase in the cost of oil. This increase led to cost-push inflation that reverberated across the world economy including the United States. Placing a ceiling on the price of oil to prevent cost-push inflation is possible if a country produces it. Doing so would stabilize the price of essential commodities and services.
- Reducing Dependencies on Foreign Nations for This Critical Resource
The largest oil exporting nations worldwide are Saudi Arabia, Russia, and Iraq. Others are Canada, the United Arab Emirates, and Iran. Currently, the US is enforcing far-reaching sanctions on two of these countries while trade disagreements are playing out with one of them. Consequently, the US would be in a dangerous position if it relied on these nations for this critical resource. Similarly, other countries are at a disadvantage if they depend on oil imports. More specifically, the exporting countries can use this precious commodity as a bargaining chip. For example, OPEC countries placed an oil embargo on Canada, Japan, and the UK among other countries in 1973 for political reasons. This embargo led to the rise in oil prices from $3 to $12 per barrel.
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