Oil and Its Impact on World Economy

Introduction

The course of the study will focus on the “Oil Companies” and the profits they generate from their operations. The study will critically analyze different aspects related to oil consumption with specific concentration to the amount of money made by these companies, the behavior of oil prices in the future and the daily oil consumption and the amount of oil reserves. Oil provides about 40 percent of the world's energy needs and is vital for economic growth. It has also become one of the key global challenges in the 21st century. Economic development and global population rise have increased demand for energy resources, and there are fears that available resources are becoming finite. This, coupled with the price volatility of conventional crude oil, has led to renewed interests in the exploration and extraction of unconventional petroleum resources. Due the ever increasing trend of oil prices, the oil companies are making huge profits whereas, the consumers burdened with increased prices.

Discussion

Tax Benefits for Oil Companies

The oil companies operating in the United States is enjoying massive tax exemptions as the tax on the oil sector which is quite low around 9% while the other business sector are paying tax of 35%. The point of concern is that the major five oil companies (Exxon Mobil Corporation, Royal Dutch Shell, British Petroleum, Chevron Corporation, and Conoco Phillips) operating in United States of America has accounted for overall subsidies of $ 21 billion in the last ten years with $ 2 billion a year (Carl, Pp, 1-34). It has been argued that these billion dollars supposed to be used for the welfare of the people instead of providing in terms of subsidy to these corporate giants. Furthermore, these oils companies have reported a total of $ 36 billion profit in the last year (Chaddock, p-1). And yet the dilemma is that these companies are still enjoying subsidies in the name of corporate welfare.

Oil Companies and Their Huge Profits

The U.S economy is still dealing with the economic recession, but the oil companies are reporting continuous higher profits. The five leading oil companies Chevron, BP, Shell and ExxonMobil have announced enormous profits in the year 2010. In the first quarter of year 2010, the profit reported by BP was around $ 5.6 billion with a 135 percent increased as compared to the past year 2009. Shell, has also announced that its profit for the year 2009 is 49 % higher as compared to the past year. Chevron, has also reported a $ 4.6 billion in terms of profit for the year with an increase 156 percent. ConocoPhillips have also reported a net profit of $ 2.1 billion and the world largest oil company ExxonMobil has recorded a profit of $ 6.87 billion with an increase of 35% as compared to the past year.

Future of Oil Prices

The future prices of oil are likely to increase as the world economy is gaining more and more dependence over the use of oil for generating energy and ...