Comparative Advantage for Oil

Comparative Advantage for Oil

Due to the global economic slowdown, Americans have been benefiting from relatively low oil prices. This is also due in part because of the instability of the Middle East and new supplies of crude oil from a variety of sources. But when the global economy fully recovers, you can expect the price of gas to keep rising.

One of the key principles of economics presented in Chapter 17 is the law of comparative advantage. For this week, consider yourself in the role of an economic adviser to the U.S. Congress and the President for Oil.

Recall that in the past the Federal Government blocked the Keystone Pipeline project and recall the oil spill in the Gulf of Mexico a few years ago.

In your initial opinion present your advice as to what they should do or not do. Support your argument with economic principles including the concept of comparative advantage and concepts from this week’s material. In your responses to your classmates’ opinions, state clearly, and on what grounds, you agree or disagree.

Noteworthy is the value of the dollar on the exchange markets, which is also a topic of Chapter 17. Oil is bought and sold globally in U.S. dollars; so all countries must buy dollars on the exchange markets to buy oil. Effectively, the value of the dollar to another nation’s currency could make oil more expensive or less expensive for that nation depending on the exchange rate when a purchase is made.