Term paper on Economic

The petroleum industry plays a vital role in the world’s economy. “The world consumes over 82 million barrels of oil per day (BPD), with the United States taking roughly 20 million BPD” (McFarlane). Petroleum is used to produce goods and services that are essential to the quality of life. It warms and cools our home and gets us where we need to go. Oil provides about 97 percent of transportation fuels, which power nearly all of the cars and trucks on the nation’s highways. It is also used to produce plastics, medicines, fertilizers and many other products that are used on a daily basis. Needless to say, the petroleum industry has a tremendous impact on the economy.

In 1859 Edwin Drake made history by becoming the first person to drill for oil. His intensions were to obtain crude oil for the purpose of kerosene lamps. Over a century later we are using oil for cars, trucks, airplanes, trains and even in homes. Drilling for oil is not an easy task; improper techniques can terribly ruin the earth’s natural physicality. Proper measures must be taken before drilling as mishaps can lead to leakage into the ocean resulting in negative media attention. Protecting the wildlife is a big concern. The industry has made tremendous strides with the use of technology. GPS satellites can help determine great areas for drilling using 3-D and 4-D images of the earth. A refinery is used to process crude oil into petroleum products; the government is closely watching and testing to assure that the environment is being maintained. Air pollution is another factor that affects the petroleum industry. The burning of gasoline used in cars and diesel for trucks are sending pollutants into the sky that increases global warming. There are laws and actions that are developing as we speak to protect the earth from polluting the air.

For the expected impact on the Petroleum industry in the current levels, it appears that the growth in real Gross Domestic Product (GDP), the petroleum and coal products had the most notable increases within manufacturing. According to the Bureau of Economic Analysis, National Economic Accounts news release for gross domestic products dated June, 28, 2007, corporate profits for the petroleum industry continually increased throughout the years of 2004 to 2006. In 2004, the seasonally adjusted at annual rate was $49.3 billion; in 2005, it rose to $70.4 billion; and in 2006, it increased to $84.3 billion. A tremendous increase occurred in the third quarter of 2006 where it leaped to $101.1 billion.

The mining sector comprises establishments that extract naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas (U.S. Dept of Labor, 2007). The unemployment rate of persons working in the mining sector was 3.2 percent considering that the natural resources and mining employment is approximately 7.4 percent and natural resources and mining establishments of goods-producing businesses were 9.2 percent. In the economy as a whole, natural resources and mining represented approximately 1.3 percent of all employment and 1.4 percent of all businesses.

The inflation rate measured by the Consumer Price Index (CPI) as of June 2007 for all urban consumers (CPI-U) indicated that petroleum-based energy decreased 0.9 percent as well as 0.4 percent for energy services. However, consumer prices for the seasonally adjusted annual rate (SAAR), petroleum-based energy costs increased at a 48.3 percent annual rate and charges for energy services rose at a 5.5 percent annual rate (U.S. Dept of Labor, 2007).

The Producer Price Index (PPI) measures the average change over time in selling prices received by domestic producers of goods and services. (U.S. Dept of Labor, 2007). In January of 2006, the PPI was 221.0 and as of June 2007, it rose to 276.2. Throughout the year, the lowest point was in February 2006 where it decreased to 209.8. Highest point occurred in May 2007 with 285.5. The graph retrieved from the United States Department of Labor, Bureau of Labor Statistics depicts this information as pertaining to petroleum refineries.














(U.S. Dept of Labor, n.d.)


In natural resources and mining, the average hourly income of production workers, in January of 2006, was $19.44. Throughout the years, the personal income increased and now as of June 2007, has risen to $20.85. However, this must be taken to account of the average number of weekly hours of the production workers. In January 2006, the average number of hours worked was 45.6 per week. This has fluctuated throughout the year as shown on the chart below and has increased to 46.3 hours per week as of June 2007.















(U.S. Dept of Labor, n.d.)











References:

Bureau of Economic Analysis, (2007), News Release: Gross Domestic Product, Retrieved on July 18, 2007 from http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

United States Department of Labor, (2007), NAICS 11 & 21: Natural resources and mining, Retrieved on July 17, 2007 from http://www.bls.gov/iag/natresmining.htm

United States Department of Labor, (2007), Consumer Price Index Summary, Retrieved on July 17, 2007 from http://www.bls.gov/news.release/cpi.nr0.htm

United States Department of Labor, (n.d.), Producer Price Index Industry Data, Retrieved on July 18, 2007 from http://data.bls.gov/PDQ/servlet/SurveyOutputServlet

United States Department of Labor, (n.d.), Employment, Hours, and Earnings from the Current Employment Statistics Survey (National), Retrieved on July 18, 2007 from http://data.bls.gov/PDQ/servlet/SurveyOutputServlet

Hi Pete,

This is a great paper! Thank you for sharing!