Increasing U.S. Oil Prices and the Economic Consequences

The increasing oil prices in the U.S are not only disturbing the local markets but also fluctuating the international markets. As a consequence, intense economical as well as political impacts are resulting both domestically as well as globally.

Globalization has changed the traditional trends of international relations as well as the conventional ideological warfare has shaped to a modern and sophisticated form. Prior to globalization, the ideological clash was based on ideologies like communism, totalitarianism, capitalism and fascism. However, presently the ideological concerns are more intense along the traditional concepts, as states are now more intensely involved into technological development and economic development. At the same time, the traditional concept of power has changed with the emergence of globalization. Now power means to be equally developed in economic, political, technological and social areas domestically as well as possess a very strong potential to conduct an influential role in international relations.

Globalization basically means privatization, free market economy, trade liberalization while bridging the communication gap among states all over the world. However, globalization is now leading to regionalism, as states are more concerned to regional economic integration to strengthen their economies.

Therefore, the world is now like a global village where every country is affected by the policies of other states at the same time the domestic policies are not unaffected. However, the world is much more affected by the economic as well as technological and political policies of America as it is the super power. For instance, the fluctuation of the U.S oil prices not only disturbs the local market of America but also the global market. Lets have a brief analysis of the impact of the U.S oil prices on the domestic as well as global market.

U.S. Oil Prices: Effect On Local Market

Oil prices are directly related to all areas of business, as it basically increases the cost of production. Since the over all transportation expenses increases from the period prior to the production to transporting the various finished products into the market and from there to the local retailers. Consequently, the cost of production increases, which leads to an increase to the selling price and the decrease in the amount of profit per products.

Therefore, the local market suffers more loses as the ratio of consumer also decreases when the prices of various products are high. Similar effects are observed in the local markets of other countries due to the global communication.
However, the oil prices has increased tremendously since 1990's as it was ranging between 10-25 during the 90's while presently the oil trading prices have increased to 40 and 60 per barrel. Therefore, it is very important for the American policy makers to realize that the commodity prices are basically determined by the relationship between the supply and demand of the oil prices which also grows side by side to the in demand growth.

On the other hand, the most debatable issue these days is the principle causes leading to the increasing oil prices. Some believe that the increase in the price of crude oil results into the high oil prices while others blame the domestic refining and marketing sector to be responsible for the rising oil prices in the U.S. Therefore, the rise in the oil prices are influencing the competitive domestic markets, where the long term strategic decision making process and management are enjoying benefits out of the weakness of the competitive market forces, which is basically resulting due to the increase in the U.S oil prices.

U.S Oil Prices and globalization

Amongst the various challenges resulting out of globalization, economic globalization is leading to a more intense situation as the world financial crises is increasing day by day with a rapid transmission from country to country. Where the domestic economic impacts of various countries are at the same time intense and are continuously growing due to these challenges of economic globalization. Though, the roots causes of such economic crises, both domestically as well as globally, are related to the fluctuating financial position of the foreign exchange and the stock markets as well as the economic volatility resulting in the instability of the international commodity markets. Nonetheless, all these are basically controlled by the U.S oil prices.

Consequently, the ratio of demand and supply in the international commodity market is directly influenced by the fluctuation in the oil prices. On the other hand, the ongoing wars and the previous wars diplomatically and strategically instigated and supported by the U.S are not due to political, religious or any other reasons but for dominating the oil market. For instance, the Crude Oil Market Crises, which include the Arab Production Embargo during the year 1973, the fall of the Shah of Iran in 1979 and the invasion of Kuwait by the Iraqi forces during the 90's etc. etc. Therefore, one can generalize the causes of these wars under the shadow of U.S oil politics. However, the sophisticated and modern tool of waging war under the shadow of oil politics is tremendously effecting the global as well as local commodity market of U.S.

On the other hand, it is strongly required to realize the significant role of the global commodity market, as it is high time now. International commodity market not only provides a smooth medium for the exchange of natural resources but also opens new opportunities in the international market for the commodity products.

Nonetheless, these include both agricultural products like wheat, coffee and wine as well as many other agricultural products that are raw. For instance, cotton, rubber, lumber and marine resources like fishes, lobsters, tuna, shrimp etc. etc. At the same time the wide range of commodity products also include metals, minerals and fuel, which are all dependent on transportation as these are related to international trade.