Impact of Oil

Impact of Oil

Introduction

People we have unlimited wants and there are limited resources to meet these wants, thus resulting in the major economic problem of scarcity. Oil reserves are scarce in the world to be able to meet the demands of people. Oil reserves are the total amount of oil that is available to the economy, however much of these reserves cannot be recovered. There are proved oil reserves which can be defined as the amount of oil that can be recovered with the available technology. Oil reserves in the world are likely to decline more rapidly in the near future than expected. The production is expected to increase for 3 to 4 years; however it is expected to decline thereafter (Jaffe, 2011).

Discussion

Current Situation of Oil Reservoirs

With increased consumption of oil there has been an increased in production of oil and it is likely to reach its peak in the near future, and it is tend to decline subsequently as the resources are limited, which will result in severe economic consequences. With the passage of years more and more will be produced and eventually the oil reserves will decline over time. Depletion of oil reservoirs is not a phenomenon that is likely to occur in the distant future, it has begun to happen now. Diagram below illustrates the situation of oil reserves (ScienceDaily, 2010).

Simple Model of Oil Depletion (Source: www.oildepletion.org)

History of Oil

Although oil was discovered early, however it was not used commonly as an energy resource until the year 1850s. In the earlier years oil was used for lighting street lamps. The demand for oil increased rapidly after the invention of kerosene lamps in 1850s. By the year 1859 there were more than fifty companies in United States that were engaged in manufacturing kerosene from coal. After a year ...