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OPEC and Oil in the Middle East

OPEC and Oil in the Middle East. Essential Questions. How does OPEC benefit its member nations? How does OPEC effect how much we pay for gas? What are positives and negatives to having an oil based economy?. Divide into Countries. Oil consumers: USA, Japan, and China

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OPEC and Oil in the Middle East

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  1. OPEC and Oil in the Middle East

  2. Essential Questions • How does OPEC benefit its member nations? • How does OPEC effect how much we pay for gas? • What are positives and negatives to having an oil based economy?

  3. Divide into Countries • Oil consumers: USA, Japan, and China • Oil producers: Iran, Iraq, Saudi Arabia, Kuwait, and Venezuela

  4. Pencils = Oil • How much will your country charge for a pencil? • How many pencils will it choose to sell/produce? • USA, China, and Japan need pencils to write and do their class work, so how much are you willing to pay?

  5. Let the Trading Begin… • USA, Japan, and China – you need pencils to do your class work. How much will you pay? • Middle Eastern countries and Venezuela – you have plenty of pencils, but need money for your country. How much will you charge for pencils?

  6. Supply and Demand Curve

  7. Solve the Problem of Competition • How can these pencil producing countries work together to make more money off of their pencils? • Join together and regulate the price so everyone makes good money

  8. Solving this Problem of Competition • In 1960, Iran, Iraq, Saudi Arabia, Kuwait, and Venezuela came together to form the Organization of Petroleum Exporting Countries (OPEC) • OPEC sets the price and amount of oil produced by its member nations

  9. OPEC • By reducing the supply of oil, the price of oil goes up, and OPEC nations make more money! • But who then has to pay more money? • Consumers (AKA- US)

  10. Before and After OPEC • What happened before OPEC was around? • Competition drove prices down • What happened to gas prices after OPEC was created? • Cooperation between oil producing nations brought gas prices up • Stabilized prices

  11. What if trade restrictions were placed on oil? • 1973 Arab Oil Embargo • Purpose: To punish US and European nations for supporting Israel in the 1973 Yom Kippur War • Arab oil nations limited oil supply to the US and Europe • Caused massive shortage (long lines for little gas) • Gas prices soared

  12. Define Specialization- think about it and discuss with the person to your left (think in terms of trade, labor and productivity) • The term specialization refers to people or companies focusing on providing a single good or service, instead many different goods. • Impact on Trade • By producing a single good or service, companies can then tradewith others who have their own unique specialization. This creates more goods overall and benefits everyone. • Impact on Labor • By training workers to complete only one task, they can perfect it and increase the production efficiency. • Impact on Productivity • Being able to create more goods at a lower cost increases the overall productivity of a company. This, in turn, benefits the economy as a whole.

  13. Positives of Having Oil as a Natural Resource(Specializing in oil extraction and production) WHO HAS THE OIL • Much more revenue! • Israel – no significant oil reserves • GDP = $170.3 Billion • Iran – Lots of oil • GDP = $852.6 Billion • Saudi Arabia – Lots of oil • GDP = $527 Billion

  14. Impact of oil on this region Dubai before and after oil wealth SEE GOOGLE EARTH

  15. Negatives of Having an Oil Based Economy • Will oil last forever? • NO!! Predictions say we will run out by 2051! • What happens when oil runs out? • The oil producing countries’ economies are in big trouble! They need to diversify! • A world without oilFULL VIDEO • What happens to other parts of the economy? • Investment ignores other parts of the economy and prevents a diverse economy

  16. Negatives of Having an Oil Based Economy • In other words… Having an oil based economy is: • Good for short term growth • Bad for long term growth

  17. Ticket Out The Door • Answer the Essential Questions • How does OPEC benefit its member nations? • How does OPEC effect how much we pay for gas? • What are positives and negatives to having an oil based economy?

  18. Literacy Rate in Middle East GPS countries • Use your device to define Literacy Rate: • the ability to read and write at a specified age- US definition...by age 15 • Using your device, look up the literacy rate of the following countries and fill in the numbers in your notes. • While you are at it, look up the % of GDP spent on education

  19. Literacy Rate in Middle East GPS countries • Israel (5.9% GDP) • Total population: 97.1% • male: 98.5% • female: 95.9% (2004 est.) • Saudi Arabia (5.6% GDP) • Total population: 87.2% • Male 90.8% • Female 82.2% • Iran (4.7% GDP) • Total population: 85% • Male: 89.3% • Female: 80.7%

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