Environmental Economics and Management
Environmental Economics studies the financial impact on environmental policies as the study aims at determining the empirical and the theoretical effects of environmental policies put in place on the economy (Kolk and Ans 34). The best tool towards making an environmental policy analysis is through a cost benefit analysis and knowing the merits of the existing, improved or the proposed policies. The environmental economics should be managed such that they have a positive drive to the economy and that they contribute to the growth and development of a nation economically and socially both in the present and in the future. The oil industry is one of the greatest contributors to economic growth for many states as it raises revenue used in other activities therefore boosting the economy. In United Stated there are various natural resources discovered and they all have a positive impact on the American community and the whole world at large.
Massive oil discovered in Alaska is biggest the onshore in 30 years and many economists have done analysis of the benefits of the projects and the spillover effects it will have on the outside world (Matt Egan 1). The oil discovered has an estimated capacity of 1.2 billion barrels making it the biggest oil discovery in the United States in the last three decades. The discovery comes as a savior for the Alaska budget as there has been a downfall in production levels in the state and a crush in the oil prices has been the greatest contributor to the decrease in the national output. The discovery came just a few days in the Alaska North slope an area that was viewed as an aging oil basin.
The oil location is strategically located and therefore will reduce the cost of extraction and transport basing it on the fact that it is 20 miles south of another site where the two companies have found another oil in a project they call Pikka (Matt Egan 1). The discovery comes as a relief after the prices of oil have been escalating and therefore affecting businesses in the United states and this therefore is a relieve as extraction of oil in a nation definitely means that the residents are the first beneficiary of the resource.
Economic analysis of the issues related to the natural resource
The economy of Alaska is expected to boom as it has had some challenges with its normal activities. In 2016 it had to freeze hiring and limiting the states employees travel exercises due to trouble in the oil industries as the costs directly affected the normal economic development due to deviation of funds budgeted for other activities to the oil sector (Matt Egan 1). The state greatly relies on oil and gas taxes for the better part of its revenue and last year’s prices and quantity of oil was a great blow as the prices were decreasing with a decrease in the oil supply. This therefore endangered the state’s economy and therefore the oil acts as replenishment to the states revenue source. The oil prices have been cut by half in the recent years and therefore this slashed the countries revenue. This therefore comes as a hope as an increase in oil supply spreads profit across the different extracting company and an increase in the barrels produced daily with a good market will have a great contribution to the states revenue at the end of the day.
Benefits and costs of the natural resource
A resource is said to be helpful if its benefits outdo the costs and the higher the benefits and the costs difference the more viable and viable a natural resource is. Oil has been applauded by the states where it is discovered as it has huge benefits to the people either directly or indirectly. The oil discovered in Alaska is the biggest onshore discovery in the last three decades. This therefore means that the initial extraction cost and the other logistics may be higher but due to the quantity of the discovered oil it is expected to cover the expense within a few years of extraction and starts earning the state some profit. If the resource is well-managed it is expected to have a breakeven within a few years after its extraction begin and set the state in a pace of enjoying the profits and hence huge revenue to be used in other projects which also contribute to the economic growth and development.
Price trend of the natural resource and the drivers behind the trend
The price of oil is very crucial on the international commodity market since crude oil is the most important commodity. The huge nations and continents greatly influence the oil price trends as they need more oil to support and maintain economic growth and this translates to huge energy consumption. The supply of oil have become limited with time as it is rare to find new oil reserves and for this reason a state that discovers a reservoir is advantaged in that they are likely to register a huge revenue after extraction and sale. The industrialized states greatly need huge supply of oil as it influences international economic development since it is needed to run the industries and maintain a steady flow of the national output. All the states struggle to lower the oil prices and maintain an economically sustainable environment to boot the businesses and hence achieving the goals and objectives at a personal level and also in the whole states economy translated through the total revenue. The graph below shows the trends of the oil prices in Alaska in relation to the production and it shows that the oil prices has been registering a continuous decrease in supply and a decrease in prices over the years.
Allocation of the natural resource between now and future or among different users
In resources exploitation it is important to take note of the past, present, and the future generation. This is because for a sustainable economy to be achieved and maintained it is advisable that a focus on the future generation be put in mind. The strategists and the economists set their plans in mind of the expected economy and put aside allocations to ensure that there will be enough resources to drive the economy in future. In United States there are reservoirs of oil underground an approximate 700 million barrels having reinforcement with other huge oil stock oils all over the world (LeMenager and Stephanie 6). This strategy was put in place 40 years ago and the main argument behind this is there is enough stock for running the economy of the states and therefore overexploitation of all the reservoirs would cripple the future economy. Failure to know this makes the resources become overexploited and exhausted with time.
A description of the different interest groups that are affected by the event
The oil industry has many stakeholders as they benefit directly or indirectly in oil extraction, purification and sale. The greatest interest group in the oil discovered in Alaska is the states government. This is because it runs the state’s economy and oil being the greatest contributor of revenue in the state means that the state will have a new source of revenue to add on the existing revenue. The state therefore will have funds to run other activities and definitely the increased stock of the oil will lower the prices commodities in the market. The other interested parties are the oil extraction and purification companies. The extraction companies are in it for business and they are paid for the services they offer during the extraction and purification of the oil. This also means that people’s living standards will be improved as they will gain employment in the industry and therefore making them interested parties. Also the neighboring states are also interested parties in this because more oil discovered means that there will be surplus for export to the neighboring states. This will also help in running the other states economy especially the ones with low supply of oil.
Oil is a very important resource and its used greatly contributes to the present and the future economy of a state. A well-managed oil industry and moderately exploited oil reservoirs saves the nation the future run to import Oil as it is one of the major keys in the economic development since it rules the international market prices of different commodities. United States have shown interest and conservatism in the oil industry by making sure that they have enough oil for running the current economy adequately and that they provide enough for the future generation as a way of making sure that they maintain a steady and a positive trend in the economy. This has therefore called for much calculations and projections by the United States economists and strategic managers as a way of creating a sustainable economy both now and in the future through proper allocation of oil as the key driver of the economy. The oil discovered in Alaska will have a great impact on the economy of the state and the whole continent at large as its will increase the stock available and therefore lowering the price due to balancing of demand and supply forces in the economy and therefore translating to a sustainable economic growth and development of the state.
Kolk, Ans. Economics of Environmental Management. Pearson, 2011.
LeMenager, Stephanie. Living Oil: Petroleum Culture in the American Century. 2016.
Matt Egan. “Massive oil discovery in Alaska is biggest onshore find in 30 years.” New York, 10 Mar. 2017, money.cnn.com/2017/03/10/investing/alaska-oil-discovery-repsol-spain/. Accessed 26 Apr. 2017.