Topic 4: Ripple Effects and Elasticity

Oil is one of the most important resources on earth. With its scarcity, it is more valuable than ever, powering most of our technology and life. As a result, any change in oil prices affects basically ever part of our life. The most obvious change it would have on our lives and the general economy is the transportation sector. Our cars depend on oil to run, so obviously, with the rise of oil and gas prices, it would cost us more. Another aspect of oil which affects us profoundly is the production of plastic. Plastic is essentially made of petrochemicals and other such resources. As we all know, plastic is basically everywhere now: in our mechanical pencils, pipes, bottles, etc. Without plastic, it is hard to find a similarly durable material which could replace plastic. With just these two factors, oil affects everything. For example, without the oil to help transport every single product in the world, trade would be dramatically decreased. Without plastic as well, there will not be such packaging on products and supplements to certain other products. The change in price of oil affects us on a larger scale (i.e. through the use of oil in cars) and also on a smaller scale (the relatively smaller changes of price in plastic products). Another way oil affects us is its position in global politics. As oil is an important resource, it is often used by countries as a way of getting what they want. For example, because of Iran’s heavy dependence on oil exports, US or other such countries could place sanctions to cancel buys in order to get them to stop their nuclear programs. Although this does not seem to affect us immediately, in fact, this would cause a rise in oil prices. So now we can see that the changes in prices for oil is an extremely delicate and crucial part of our lives. As a result, organizations such as OPEC attempt to regulate oil prices in the oil-exporting countries to prevent too much fluctuations. Another example of resources which affects us very profoundly is rare earth metals. Living in the technological age, we are very dependent of the rare earth metals in our products, such as cars. However, due to China’s monopoly on the possession of rare earth metals (up to 95%), China could easily use it as a way to force countries to do what they want. For example, China had withheld exporting such metals to Japan do to island disputes, which had hurt Japan’s economy badly seeing as they produced a lot of technological products.