MICRO ECONOMICS Essay Example

Introduction

Trade enables countries to build up their economies and become internationally relevant (Arouri 2012, p, 342). The new supplies that exist targets the U.S. household petroleum product demands that encompass the U.S. reduced reliance on crude oil imports from a foreign country. The constant proficient growth of domestic capital guarantees a better progress in the domestic supply-demand stability. Economic increase does not imply an automatic wide share gains. Policy choices have great impact on the matters pertaining the state ,as abject poverty persist despite the growth experienced in the U.S. economy (Kilian 2012,p,1166).

Large fluctuation in the price market may present unprecedented effects on the predominant market in the U.S. Macroeconomics instability is realized when financial crisis affects the living standards of the people within the economy(Brown2012,p, 462). As such, large fluctuation would mean an irregular pattern in the growth of U.S. economy. Per se, large swings experienced in the economic activity, unsustainable levels in the exchange rates. Further, it endangers the process of attaining maximum economic growth in the country. Therefore, maintaining the macroeconomic stability is essential in sustaining development and inclusive exchange rate stability.

Additionally, the main objective of microeconomics is the contribution if the economic, as well as, the social well being in the equitable and sustainable manner. Because of oil price stability the economy index provides a critical task of sustaining the economy, as close as possible to full employment. Therefore, the sustainability would be imperative for the success of any state. In this respect, the U.S actively maintains its macroeconomic level, in order to eradicate poverty and create a sustainable economy for its citizens. Economic growth does not imply an automatic wide share gains. Policy choices have great impact on the matters pertaining the state ,as abject poverty persist despite the growth experienced in the U.S. economy(Arouri 2012, p,345). In this retrospective paper various economic concepts are applied to get the concept of the trade in oil markets and the economy stability of countries involved.

Structural outline of the crude oil markets

Petroleum products are the world mainly economic sources of power and as a result they are vital to the economy development (Lenzen 2012, p110). The importances of these products are aggravated by the high demand for polished petroleum yield, largely in the transport segment. Basically, petroleum products influence basically motor vehicles, aero planes, marine ships, and locomotives around the sphere. Generally, goods resulting from oil, such as petrol, plane energy, diesel petroleum, and heat lubrication. The 33% of the total production is consumed by household, business, and producers globally. The comparison, of normal gas and oil supplies are the world’s most energy needs.

Activities such as production, refining and distribution can occur inside a global market which is a broad objectivity that bonds the buyer and seller internationally, that is sustained by a worldwide economic marketplace. The physical infrastructures cover an immense range of resources that includes drilling of rig, pipelines, harbor, tanker, barge, and crude oil storage space services, for retailing storage tanks and gasoline pumps.

Capitalism has been taunted as the reason for the increasing economic oil growth. However, there is a correlation between oil trading and supplies change and capitalism. Economists postulate that capitalism has a greater influence on the system in contrast to individual change (Killian, 2012 p 1116). The effect of capitalism is greater among individuals with lower incomes while those who enjoy higher incomes reap great benefits from the system. Therefore economic inequality is largely more of an individual problem that it is a social problem. Individuals can play an integral part in influencing their status.

The global markets counter to lead changes in crude oil manufacturing and buyer’s wants in contradictory geographical regions. Measures in the global marketplace are sustained by futures and further monetary contracts that permit consumer and sellers to proficiently cover them against high prices and other business threats, thus diminishing the impacts of cost instability in their business. In summary, the worldwide oil marketplaces comprises of contributors who facilitate in flowing of oil from where it is formed, refined into final products, and finally sold to consumers.

Trade deficit

Trade deficit is the financial position where a trading country’s import surpasses the exports (Reboredo, 2012, p 419). Thus it results in a pessimistic stability of trade as indicated in the statistics from the respective countries where the oil traders discuss oil the currency stability. Trade shortfall is a frequent occurrence in nearly all worldwide economies due to the needs and wants. Trade deficits occur by the fact that some countries could be manufacturing household goods overseas. Therefore, the result in exportation of the raw material contributes to the trade deficits.

Oil shipping Infrastructures: A significant element of supply chain

An essential element of the supply sequence is the structure of oil channels, railway, oil tankers, and trucks that dispense the crude oil to refineries (Tverberg 2012,p ,28). Oil channels are predominantly significant in since they distribute an immense bulk of household crude oil supply to U.S. refineries. Conversely, oil channels growth has not been radical with the extensive increase in crude oil manufacture. The results restricted access to professional shipping of oil from manufacturing areas to consumer markets. In favor of rationing there have been obligatory oil channels since the shipper supplies for transportation have surpassed the ability of the oil paths. Therefore the local manufacturing should be getting the refineries to relocate overseas imports to the degree of its prospective. Blockages that happen on oil paths structures have also dejected crude oil costs in U.S and other western countries due to prices in world markets.

Rising manufacturing and slow growth of new oil channels has led to a growing quantity of oil elated by barge, road, and railways. In the past few years several rail workstations have been urbanized in Northern Dakota, and towards the final year of 2013 about 700,000 barrels of Bakken crude oil was dispatched on daily basis to refineries in the Gulf Coast, East and west Coast.

How the Refining Sector has affected present Crude Market?

Refineries along the Coast east of the United States are amongst those in search of the rather low-price household oil provisions. A number of refineries have begun to get an entrée Bakken oil stores via the rail and barge, while others are forecasting to do the same. Similarly, some East of the coast refineries are now getting the way in Eagle Ford oil stores via barge and tankers. Lots of refineries in the U.S. mainly in the Midwest, mid-continent, and Gulf Coast have invested in intricate refining components that are projected to manage the cost effective crude oils, which are being shaped in rising scope from the oil channels of Canada, Mexico and other neighboring countries.

Bakken and Eagle ford refineries are currently intended to manage crude slate consisting primarily of heavy sour crude oil supplies (Tverberg 2012,p 28). Refineries that have provided in complex refinery ability manage most imported thick crude oil because any potential improvement in product realizations from operating light crude oil in these refineries is typically more than counterbalance by the high cost of the lighter crudes as compared to Thick crudes.

Global Trading Pattern

Current global trading trend, as demonstrated in the figure below reveal the effects of global consumer and trader reacting to marketplace and permissible and geo-political limitations to obtain diversity of crude oil from when it is produced to where it is most valued, and getting the facts about the outlay of shipping.

Student’s Name

On the other hand, if a country decides to prevent consignments of oil to the United States but maintain the creation, there may be a comparative on the oil prices. The supplies which flow to the United States enables in discovering of new entities help in liberation of procurement to the market. In this case, what affect s the price in the long tenure is the large-scale supply and needs for the crude oil; global trade flows are noticeably less important. Conversely, the global trading blueprint, and shifting production attached with shipping confines can have an imperative impacts on local value, causing local value for crude oil to be severely low than global prices, in that case that do not return limitation on acquiring crude oil making to marketplaces.

In order for the nations to acquire petroleum products, U.S. refiners must import roughly 7.6 million barrel of crude oil on daily basis. In this case it represents nearly half of their crude oil refinery inputs (Reboredo, 2012, p 419). These trade in originates from countries, such as Canada, Colombia, Mexico, Venezuela, and Saudi Arabia, that represented the top five sources of foreign supply as shown in the figure below in the year 2013.

Student’s Name 1

The expansion in oil production has caused a decrease of almost 23% in U.S. Nevertheless; the U.S. still trade in main capacities of oil and continue to depend on globe oil marketplace to a larger measure. Supply interruptions are aspects of world oil markets that creates basis for significant ambiguity and can directly affect the market prices. A typical example is in the year 2011 during the Arab Springs, where the Libya oil production dropped by 1 million barrels in a day compared to 2010 spots. This tide of supply was met by some of the fragile global demand in 20 years. The results of oversupply would in general have led to an OPEC production decline that would have balanced the market and stabilized prices, but in the face of sustained US shale supplies, the Group decided to fight for market share and maintain production at record levels.

Conclusion

The central peak of this study comes from the reason that proceeds can be reduced without essentially reducing production. This obliges the outstanding nature of profits; it is thus taking into account the costs of production. The exchange rate among countries gauges the currency value of a country. In essence, exchange rates assist the rapidity of trade between two countries in spite of the special currencies concerned. All these economic variables have thus to be adjusted accordingly to a way that would guarantee economic growth. From the economic statistics gathered from the respective countries.

Reference list

Arouri, Mohamed El Hedi, Adel Ben Youssef, Hatem M’henni, and Christophe Rault. «Energy consumption, economic growth and CO 2 emissions in Middle East and North African countries.» Energy Policy 45 (2012): 342-349.

Brown, Tristan R., Rajeeva Thilakaratne, Robert C. Brown, and Guiping Hu. «Techno-economic analysis of biomass to transportation fuels and electricity via fast pyrolysis and hydroprocessing.» Fuel 106 (2013): 463-469.

Kilian, Lutz, and Daniel P. Murphy. «Why agnostic sign restrictions are not enough: understanding the dynamics of oil market VAR models.» Journal of the European Economic Association 10, no. 5 (2012): 1166-1188.

Lenzen, M., D. Moran, K. Kanemoto, B. Foran, L. Lobefaro, and A. Geschke. «International trade drives biodiversity threats in developing nations.» Nature 486, no. 7401 (2012): 109-112.

Reboredo, Juan C. «Modelling oil price and exchange rate co-movements.»Journal of Policy Modeling 34, no. 3 (2012): 419-440.

Tverberg, Gail E. «Oil supply limits and the continuing financial crisis.»Energy 37, no. 1 (2012): 27-34.