The Apocalypse of America's Reduction of Oil Dependency
Published in Sina
(China) on 8 April 2011
by Yu Fenghui (link to original)
Because rising oil prices’ negative impact on the recovering U.S. economy is increasingly prominent, the economic growth rate of this first quarter was dragged down by 0.5 percent; U.S. President Obama called again on April 6 to reduce oil dependency (April 7, China News Net).
The world economy is reviving from the once-in-a-century financial crisis, the demand for oil is growing and some mid-east and north African countries’ political turmoil has influenced the expected price of oil; under the combined effects of these factors, international oil prices keep rising, which directly constrains and drags the recovery steps of the world economy. As the economic leader in the world, the United States obviously pays double attention to and is anxious about the impact of high oil prices on economic revival. That’s why even U.S. President Obama once again appealed to lessen dependency on foreign oil and instead rely more on clean energy; this move indicated how important oil prices are for the U.S.
High oil prices dragged the U.S. economy down in three ways. The first is that it affected the consumption drive of the economy. U.S. consumption comprises 80 percent of the economy, and falling consumption was almost fatal to the U.S. economy. The increase in oil prices makes U.S. consumers spend more on oil, which cannot be transformed into motivation to revive the economy, since the funds spent because of increased oil prices go to oil producing countries.
At the same time, increasing oil prices tied up domestic consumption capacity, reducing the pulling power of consumption to the economy. According to a poll at the end of the month conducted by Associated Press and GFK3, about two-thirds of Americans expected that the rising oil price would cause difficulty in living in the following half a year; about 70 percent of respondents expressed that they would cut down other expenditures; about 64 percent said that they would reduce driving; and 53 percent of the respondents indicated that they would change their long-distance travel into short vacations.
The second aspect that was affected by high oil prices was the burden of companies who mainly use oil to run. In other words, the operations of those companies were tremendously affected. Rising oil prices have put new pressure on U.S. businesses trying hard to free themselves from the high unemployment rate and housing market downturn.
The third point was that high oil prices could possibly drag the U.S. economy into recession again. Based on U.S. economists’ prediction, the sharp increase of oil prices since the end of last year has been causing harm to the U.S. economy; if the price of crude oil rises to $150 per barrel and stays there for several months, the U.S. economy will fall into recession again.
At the moment, the world is stepping into an era of high oil prices; the burden of high oil prices on the U.S. economy raised a serious alarm to other countries in the world — high oil prices are leading the profits in every aspect of society in overseas oil producing countries, deteriorating the distribution of wealth and striking a serious blow to and exploiting economic development programs. High oil prices also restrained the development of the automobile industry, which sharply reduced the power of the auto industry on the economy. Additionally, high oil prices have been facilitating the deterioration of inflation, nullifying the monetary policy’s effect on inflation. High oil prices directly increase the costs of related industries and indirectly push up other costs like logistics, which without doubt will aggravate inflation.
The world economy is reviving from the once-in-a-century financial crisis, the demand for oil is growing and some mid-east and north African countries’ political turmoil has influenced the expected price of oil; under the combined effects of these factors, international oil prices keep rising, which directly constrains and drags the recovery steps of the world economy. As the economic leader in the world, the United States obviously pays double attention to and is anxious about the impact of high oil prices on economic revival. That’s why even U.S. President Obama once again appealed to lessen dependency on foreign oil and instead rely more on clean energy; this move indicated how important oil prices are for the U.S.
High oil prices dragged the U.S. economy down in three ways. The first is that it affected the consumption drive of the economy. U.S. consumption comprises 80 percent of the economy, and falling consumption was almost fatal to the U.S. economy. The increase in oil prices makes U.S. consumers spend more on oil, which cannot be transformed into motivation to revive the economy, since the funds spent because of increased oil prices go to oil producing countries.
At the same time, increasing oil prices tied up domestic consumption capacity, reducing the pulling power of consumption to the economy. According to a poll at the end of the month conducted by Associated Press and GFK3, about two-thirds of Americans expected that the rising oil price would cause difficulty in living in the following half a year; about 70 percent of respondents expressed that they would cut down other expenditures; about 64 percent said that they would reduce driving; and 53 percent of the respondents indicated that they would change their long-distance travel into short vacations.
The second aspect that was affected by high oil prices was the burden of companies who mainly use oil to run. In other words, the operations of those companies were tremendously affected. Rising oil prices have put new pressure on U.S. businesses trying hard to free themselves from the high unemployment rate and housing market downturn.
The third point was that high oil prices could possibly drag the U.S. economy into recession again. Based on U.S. economists’ prediction, the sharp increase of oil prices since the end of last year has been causing harm to the U.S. economy; if the price of crude oil rises to $150 per barrel and stays there for several months, the U.S. economy will fall into recession again.
At the moment, the world is stepping into an era of high oil prices; the burden of high oil prices on the U.S. economy raised a serious alarm to other countries in the world — high oil prices are leading the profits in every aspect of society in overseas oil producing countries, deteriorating the distribution of wealth and striking a serious blow to and exploiting economic development programs. High oil prices also restrained the development of the automobile industry, which sharply reduced the power of the auto industry on the economy. Additionally, high oil prices have been facilitating the deterioration of inflation, nullifying the monetary policy’s effect on inflation. High oil prices directly increase the costs of related industries and indirectly push up other costs like logistics, which without doubt will aggravate inflation.