The economic impact of the Oil Crises to the US. Petrodollar recycling

Abstract

Following the second industrial revolution, the globe entered a new period of technological advancement and commercialization, which in turn increased demand for crude oil. The supply of crude oil not only became crucial for commercial businesses but also developed into a crucial resource throughout the two world wars. Over the past few decades, an increasing number of nations have turned into contemporary industrialized economies where oil has become a key determinant of living standards. Since the 1970s, black gold has been a major player in the world economy, and several market assessments have focused on oil and its connection to financial crises. The phrase "petroleum dollar" is used to refer to oil sales earnings. Each nation or entity that wants to purchase oil must provide money in exchange and obtain these dollars from some other source. The biggest driver of global demand for the dollar, which remains the reserve currency, is the price of oil in dollars. Because there is a growing need for energy on a global scale, and the need for oil is what is driving this. The origin and evolution of the petrodollar notion will be discussed in this research before the petrodollar phenomena is exposed from a new angle and with new conclusions. Oil exporters accumulated significant petrodollar surpluses from historically costly oil, particularly throughout the decades 1974–1981 and 2005–2014. These "petrodollar surpluses" are net US dollar equivalents made from the export of petroleum that exceed the demands of the exporting nations' domestic development. Petrodollar recycling lessened the 1973 oil crisis' short-term recessionary effects, but also created issues, particularly for oil-importing nations that had to pay significantly higher oil prices and take on long-term obligations. The name "petrodollar" was initially used during the oil crisis in the early 1970s, and the first significant petrodollar boom (1974–1981) caused more financial difficulties than the second (2005–2014). The main aim of thesis is to investigate the impact of oil crisis on the economy of US and recycling process and policies of petrodollar. The method applied is chosen to be qualitative research method where author will examine current literature on the topic.