Crude Oil: The Indispensable Commodity
The Arab Oil Embargo of 1973 underscored the importance of crude oil as a commodity in the global economy. During that year, the Arab members of the Organization of Petroleum Exporting Countries (OPEC) placed an embargo on crude oil shipments to Western countries.
Within a matter of weeks, the price of crude oil skyrocketed by 400 percent, and a number of industrialized nations were thrown into recessions, experiencing high inflation and high unemployment for a number of years thereafter. The oil price shocks of the 1970s and their debilitating effects on the global economy underscored crude oil’s indispensability.
The United States is the third-largest producer of crude oil in the world. The United States produces more than 7 million barrels a day (this includes oil products), behind only Saudi Arabia and Russia. In fact, the United States didn’t become a net importer of oil until 1993; until that point, the United States produced more than 50 percent of the oil it consumed domestically.
According to 2010 figures, the United States imports about 65 percent of its oil. If energy (oil) independence is measured by the percentage of oil a country imports, then the United States is more energy-independent than both Germany (which imports 80 percent of its oil) and Japan (which imports more than 90 percent).
The biggest oil exporter to the United States isn’t a Middle Eastern country, but our northern neighbor. That’s right, Canada is the largest exporter of crude oil to the United States! Persian Gulf oil makes up about 20 percent of imported oil to the U.S.
The point here is that a lot of misinformation about this topic persists, and you need to be armed with the correct figures to be a successful investor.