Globalization and Oil: A Quick Insight

Globalization and Oil: A Quick Insight
By []Justin Marraffa

A Quick Insight on Globalization and Oil

Globalization is a loaded and broad word referring to the process in which an organization develops international recognition and begins to operate on an international level. Globalization is said to date back all the way to 1492 when Columbus discovered the Americas and supplies were sent across the seas. In more recent years, specifically the past 2 decades, globalization has become extremely prominent due to the significant increases in technology. Technology in information, communication, and transportation are driving factors behind globalization. As we all know, nothing is "free," so what are the costs and benefits of globalization? I am going to focus on the consumption of finite resources, more specifically oil.

To begin we want to look at why oil matters in globalization. Oil is the most prominently used energy source on Earth. But what is it used for? Oil is used to transporting almost all goods from one place to another, which in a global economy means these goods are sent all around the world from where they are manufactured. Trains, planes, boats, trucks, and cars that all run on oil based products are used by most businesses. Even if a businesses product or service does not directly use oil to be manufactured, or even if a product or service does not require oil to be used to function, all of these products and services are some how interconnected to oil due to transportation. This affects the prices of products and services due to transportation for international businesses and also affects the economy of oil-based countries.

Now that we know a major reason why oil matters we can look in to how it has affected the global economy. In one-decade oil prices skyrocketed from $60 a barrel to a whopping $146 a barrel in 2009 due to supply and demand of oil, which was vastly influenced by globalization (Pacheco, Lihong, Weinmann, Salami, Antweiler). This left oil rich countries with more money and more stable economies. Since the rise in oil prices over that decade, prices began to drop and are currently sitting slightly below $50 a barrel. While motorists around the world are seen to be winners in this situation, for example United States motorists are said to be saving an estimated $550+ yearly on oil/gasoline in 2015, countries with oil based economies are the ones taking the big hit (Randle).

Venezuela has the world's largest oil reserve and its government has been using oil profits to balance itself paying for health care, pensions, even to help subsidize housing and groceries for citizens (Kottasova). Due to the sinking of oil prices Venezuela in 2015 saw an inflation rate of 150% and rising. Saudi Arabia, another country that runs on oil, saw an almost $100 billion budget deficit in 2015. While Saudi Arabia is the world's lowest cost producer of oil, it is evident that even they need higher oil prices to sustain a balanced economy. Lastly on my list is Iraq. With the war on ISIS going on, Iraq needs higher oil prices to sustain this war. Even though Iraq collected record amounts of oil in 2015, the increase in production still did not compensate for the low prices of oil. A major problem for Iraq is that they have a vast amount of oil reserves, but need money to access it, which is difficult for the country in a time where oil prices are so low. These are but a few of the countries that rely on oil for economic stability and you can see how many different issues they have run in to.

Besides the major concerns of oil-based countries economies there is another issue that I have not brought up yet. This issue is oil renews at such a low rate it is seen as finite, meaning it will run out. Alternative energy is on the rise, but not enough to sustain the global economy. No one can say for sure when oil will run out, but estimates show that it won't be long. BP estimates that at the rate we are currently at, in 2014, we had 53.3 years left of crude oil (DiLallo). That is also an estimated 1.688 trillion barrels of crude oil. Other estimates are longer, reaching 60-70 more years, neither estimates are far from our time. Globalization has said to have reached its peak in recent years meaning the usage of oil may not rise at such an extreme rate, but even 70 years is not long from now in the grand scheme of civilization.

Globalization and oil affects everyone, whether it be a single United States citizen saving on gasoline or an entire countries economy like Venezuela or Iraq losing billions of dollars due to a decrease in oil prices. Alternative energy needs to be the next step in energy consumption and it will be a race to see if it will be able to compete with the amount of energy used by oil today.

Works Cited

Kottasova, Ivana. "5 countries crushed by oil price collapse." Money.cnn. CNN, 30 Dec. 2015. Web. 20 Mar. 2017.

Pacheco, Julia, Lihong Yang, Jens Weinmann, Doyin Salami, and Werner Antweiler. "How Does the Changing Price of Oil Affect Economies around the World?" Yale Insight. N.p., 31 Aug. 2015. Web. 20 Mar. 2017.

Randle, Jim. "Low Oil Prices Are Double-edged Sword for Global Economy." VOA News. N.p., 24 Dec. 2015. Web. 20 Mar. 2017.

DiLallo, Matt. "The world has 53.3 years of oil left." USA TODAY. The Motley Fool, 28 June 2014. Web. 20 Apr. 2017.

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