[Author’s Name]
[Institution’s Name]
Essay on Oil and its Economics
Abstract
The purpose of this paper is to illustrate the economics of oil and its impact on the commercial aviation industry.
Introduction
In the last few months, there has been increased media coverage about record high oil prices and future global oil production. Inevitable tightening of supply is destabilizing oil markets, which now exhibit extreme price responses to the smallest of disturbances. Interestingly, very few people know that world oil production is nearing its all-time peak, and today’s $60 barrel may seem like a bargain a few years from now. Production in more than 54 of the 65 most important oil-producing countries has already gone into decline, with the Middle East predicted to follow soon. The implications of having less oil tomorrow than we have today are far reaching with a global crisis certain to follow. Energy-intensive industries like commercial aviation will suffer first, followed by other industries, national economies, and the global economy. Ultimately, oil shortages will severely limit the world’s ability to sustain its population as food production relies heavily on fossil fuels. This is not a conspiracy theory or bible prophecy. Rather, it is the scientific conclusion of the most widely respected and conservative geologists, physicists, and economists.
The world is not running out of oil, but its ability to produce high-quality cheap and economically extractable oil on demand is diminishing. With great effort and expenditure, the current level of oil production can possibly be maintained for a few more years, but beyond that oil production must begin an irreversible decline. More than 95 percent of all recoverable oil has now been found and approximately 90% of all known reserves are currently in production. There have been no significant discoveries of new oil since 2002. Oil is now being consumed four times faster than it is being discovered, and the situation is becoming critical........
