Homework Question on Low Oil Prices
- The development of new extraction technologies in the oil and natural gas industries has shifted the world’s energy economy over the last five years to one where the United States is at the forefront as an energy producer. With the increased production in oil and natural gas, the pipeline transportation systems are at capacity and alternative methods are used to move un-refined and refined product throughout the United States. One such method is the movement of crude using railcars.
- A recent accident in West Virginia has highlighted the delicate balance of the energy movement throughout the United States where a rail accident occurred, see: http://powersource.post-gazette.com/local/region/2015/02/17/Derailed-CSX-train-in-WestVirginia-hauled-newer-model-tank-cars-oil/stories/201502170171 .One aspect of a vibrant society is the availability of low cost energy. However, many sources of energy result in polluting the environment we live in.
- Provide a one page (1.5 spacing, 12 point font, 1” margins) assessment of the energy status in the United States and provide your opinion on what should be done in the near term of the next 5 to 20 years to balance a healthy economy with a clean environment.
Homework Answer on Low Oil Prices
Since the United States of America and the republic of Canada’s decision to begin drilling for crude oil, the supply of oil in both countries has increased considerably in the last ten years. Among other issues contributing to the excess supply of oil, is the weaknesses in the economies of most western countries across Europe. European countries embraced the initiative to reduce oil consumption and instead resorted to more efficient and environment-friendly sources of energy.
According to the International Energy Agency 2014 report, the oil supply exceeded the demand in the United States of America by the late 2014. The world’s largest companies situated in oil rich countries such as Saudi Arabia and United Arab Emirates refused to reduce their production. This situation forced the prices in the US to fall sharply (El Erian, 2015). OPEC, for instance, insisted on ignoring calls to reduce production rates despite up to 50% drop in prices. Although low prices of oil are a relief for oil consumers, oil producers reliable on oil sales suffer the consequences.
The derailed train that carried over 100 tankers of crude oil in West Virginia setting ablaze at least 14 cars in a snow storm reveals evidence of the refusal of oil companies to halt their production processes. Despite the excessive oil available both for domestic use and export, the companies insist on producing crude oil.