Macroeconomics deals with the behavior of the economy as a whole. It includes matters with regards to the Gross National Product (GNP), investments, inflation, balance of payments, among others (Costales et.al. 2000).
Macroeconomics also deals with the short-run and long-run economics growth or maybe fluctuations in the aggregate and also in the flow of business in the country.In addition, the center of macroeconomics lies on the economic performance and guiding principles that affect certain behavior such as consumption and investment, balance of trade and dollars, the fluctuations of wages and prices, monetary and fiscal policies, the stock of money, the government budget, interest rates and national debt. (Dornbusch et.al.
, 2003)One of the concerns of macreconomics is scarcity. It is a known fact that not everything is abundant. Thus, the resources, not being able to suffice for the people is not surprising.
Actually, scarcity is even the essential reason as to why economics has been created since economics is to efficiently allocate resources to satisfy unlimited human wants and needs (Costales et. al., 2000). Scarcity is inevitable and is even a part of human daily living. As we know, people’s needs and wants are unending. Given that people are free to need what they need and want what they want, enough is never enough.Scarcity is a very difficult problem to give solution to. More than not having enough resources for everybody, allocating the resources in an even manner is also a problem.
The limited resources in the surface of the earth are not enough for the allocation to be abundant, only sufficient and to be able to satisfy the people. (Costales et. al.
, 2000)The focus of scarcity lies into four basic questions: (a) What to produce?; (b) How much to produce?; (c) How to produce?; and (d) For whom to produce? (Costales et. al, 2000)Petroleum, minerals, metals, and even water, are some of the scarce resources in the world. However, a thing cannot be just labeled as scarce. In the case of petroleum, minerals, metals and others scarcity may be attributed to its property of slow regeneration, meaning a very low rate of regeneration or renewing. However, such resources are still called non-renewable. Petroleum also has been very essential to daily living.
Thus, the very high demand to such commodities also does not help in the preservation, let alone the decrease in the use of such products. It is not surprising that these commodities have a very high market price, after all, the more scarce the commodities, the higher will be the market value for such (Dornbusch et. al. 2003). As for the water, it has a high rate of regeneration, making it known as a renewable resource, but the demand for the commodity is sky-rocketing.
It first seemed as to be a very abundant resource, but because of the accumulation of pollution worldwide, water sources have been contaminated and thus, decreasing possible sources of the commodity. The increase in the number of people using the resource does not prevent the scarcity of water as well. Because of the seemingly abundance of the resource, the people tend to consume more than what is being needed.
The most alarming threat for the time being is the global oil scarcity. It is a known fact that a lot of products depend on it. That is, the gasoline for automobiles, kitchen stoves, appliances and even the simplest of products in the grocery are being affected since of the costs of transportation of the goods, the gasoline of the vehicle which carried the goods. Consequentially, the demand for the commodity is very high. In turn, the price of the commodity is also very high. Although some countries in the Middle East are very full of it right now, the oil deposits would be depleted someday. After all, oil deposits are non-renewable resources.
Although there are technologies and measures are being developed to offset the depletion, it does not fully solve the problem. Such measures include the lessening of the use of the resource, resorting to environmental friendly ones. On the other hand, technologies being developed include the production of the substitute substance for petroleum and even solutions that work as an extender for petroleum. Not only do the measures and technologies offset depletion, it also creates substitutes for the product, thus decreasing the price somehow.Some people are not alarmed of the possible depletion of the oil deposits, instead masking the possibility of the impending doom of the resource. It may seem so now that it is nowhere near nil. But it will not in the future.
Testing of the effect of technological advancement in oil has been conducted. As such the technology of enhanced oil recovery (EOR) has been applied to two oil producers: the Forties in the North Sea and the Yates field in Texas. This is to determine the extent of the effects of the technology on the oilfield. The EOR has been believed to significantly increase the oil being extracted and even the recovery of the field of the gas and oil (Gowdy and Julia, 2005). Better drainage for the oil is what the EOR does to oil extractors. However, it is only a temporary boost in the extraction because after some time, the extraction would be more difficult (Campbell and Laherrere, 1998).The proof of the EOR came when empirical data were presented by John Gowdy and Roxana Julia. In the Forties oilfield, EOR was done to increase the production.
It did temporarily increase the production by decreasing the decline in production from 6.4 to 3.5 percent. However, after 2 years, there was a decline in annual production. It decreased by 19.
32%. Succeeding years did not reverse the situation. The decline was still present although it only stayed in an average of 10.44%.
Still, the decline in the production cannot be fully attributed to the technology of EOR. After all, the study conducted did not have a control case. It is impossible to determine if the decline would still be such if the EOR has not been invested on. Also, it is impossible to determine if there was a change in the recovery rate of the oil and gas deposit.
The study in the Forties oilfield has also been employed to another: the Yates oilfield in Texas. They are quite different but the effect of the EOR may still be present, nevertheless.In the end, the promise of EOR is not really beneficial. Like the Forties oilfield, the Yates oilfield also experienced a growth in the production for a certain period of time. However, the increase was countered by a decline in the production after some time. Although the EOR measures in the Yates oilfield were said to be more advanced and better than in the Forties oilfield, the results were the same. EOR initially makes a promise of increase in the production at the start and then a decline in the succeeding years.
In the end, technology poses as a more detrimental resort for the extraction of oilfields. Since the drainage of the oilfield would be better and extraction would be also better, the exhaustion of the oilfield is faster than without the technology (Gowdy and Julia, 2005). Basically, the faster exhaustion would decrease prices for the time being, since increase in supply would lessen prices. Although, by doing so, the supply for the future is put aside. Thus, everything would be disadvantageous to the future generation.
Having more or less the same demand, the future generation has to bear with the already very limited supply and much higher price of petroleum.Developed and developing countries are the reasons of increasing demand for petroleum worldwide. Most of the high demands come from the United States and Europe. Also, there had been a recent increase in the demand of China and India.
Definitely, none of these help in the stabilization of the petroleum economy. Eventually, people will face steep prices. Certainly, developments in the alternatives and conservation should be planned.
Also, reconstructuring of economies whose developments rely on oil must be made. (Gowdy and Julia, 2005)As time goes by, the supply of petroleum decreases. Pressure will be on developments which should be made with petroleum.
Although technology may be of a promising solution, by developing new sources of reserves and ease the exhaustion of the petroleum, the studies on the Forties and Yates oilfields drag technology as beneficial. As technology was considered only masking the effect of extraction, that is scarcity.Taking this in mind in the worldwide supply and demand of petroleum, the generalizations done in the Forties and Yates oilfield is very significant.
The oilfields in the Middle East may be doing threats to the future supply of the petroleum. Saudi Arabia, the most prolific oilfield in the world, is already subject to EOR. If it follows the same result as to that of the Forties and Yates oilfield, the oilfield will be exhausted faster and the production will decline.As a matter of fact, the rising oil in prices currently is caused by the impending extinction of the resource. The oil deposits are being exhausted to their maximum capacity and making the oilfield nil. In March 2005, the price of a barrel of oil changed from 20 dollars a barrel to 55 dollars a barrel.
It is a very significant change when the only time for this change is only for a year. Yet, the people do not seem to be bothered by price changes in the oil. Perhaps the reality of the oil being scarce does not ring a bell to the common people. Carl Jung was right about his statement: “people cannot stand too much reality”. (Kunstler, 2005)Only a few years from now, the depletion of oil resources will be a possibility. More so when it plays a vital part of the human daily living as it brings to life some of the most luxurious appliances ever known to man such as: air conditioning, cars, airplanes, electric lights, movies, recordings and others. (Kunstler, 2005)Unknown to many is that how soon is the depletion of the petroleum commodity. Global oil production peak refers to the maximum production moment of oil producers.
After the peak production, the production will decline. What is shocking is that the United States oil producers already reached the global oil production peak in 1970. (Kunstler, 2005)In the case of the water, Michele Taylor states that the commodity is being taken for granted. We just use water as something that immediately comes out of the faucet without really thinking where the water came from. From what kind of water resource, aquifer or lakes the water is being generated from. (Taylor, 2005)Not only is the water use being abused, the population growth demanding more land and demanding more water is also a problem. The pressure is being put into hydrologists who should answer to these demands. Actually, the water being pumped out, that is, surface water, has increase from 150 billion gallons per day to 250 billion gallons per day from the past 50 years.
That does not stop at there. It is believed in year 2040, the surface water to be pumped per day will reach up to 440 billion gallons per day. In addition, since it is difficult to find water sources, the quality of the water being pumped is also being compromised. (Taylor, 2005)As a solution to the water scarcity the regulation of the use is being endorsed by hydrologists. As much as possible, people should use equipment that maximizes the use of water like showers, drip irrigation and even recycling practical water. (Taylor, 2005)At the end of the day, scarcity will still be present. It does not matter if the resource is renewable or non-renewable. So long as there is demand for a commodity, resources will tend to be scarce.
After all, everything in this world has a demand. Blaming the non-renewability of a commodity does not do anything to its supply. Also, it is just an excuse to not develop technologies not following the path of the EOR in the Forties and Yates field. Commodities do not also have to be blamed for being scarce. It is the human’s demands that they meet in the end. Nevertheless, humans demanding a certain amount should not be held responsible.
The existence of demands is just normal in this world. It is just a matter of allocation of the commodities and the distribution is what really is economics is about.