Proposals for the Oil Market

Category: Business
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The oil market has always been known to be very unsteady. The prices of oil barrels seem to always increase and decrease constantly. While the demand for oil is low and there is an excess of the product, it creates a producer surplus causing prices per barrel to drop. On the contrary, when demand is high and there is a shortage of the product, prices increase. This is what has been happening since the beginning of the oil boom in 2010. Oil has now become a necessity for people in West Texas because not only is it a valuable resource, but it also creates numerous jobs that help decrease unemployment rates. With the market of oil being so demanding, larger quantities of labor are required to operate. Many out of region employees are introduced and a new major shortage of a resource arises. Housing is affected by the oil market and becomes short in supply and high in demand with the rapidly increasing population of these areas. As prices go up for housing due to the lack of quantity of available living spaces, many original residents find it harder to pay for rent or other necessities. Not only are rental-housing services affected, but also the real estate market has hit new out of reach listings for many lower income families. Only families with high enough income are able to keep up with payments for housing. Rising prices begin to cause a constant stress on residents who are unable to obtain enough money to pay for the service of housing. Three different proposals have been put forth by those affected negatively by the rising prices of oil. The first proposal is that city governments should enforce a price ceiling that would limit rental prices for apartments or homes. Firstly, a price ceiling would only cause an even larger shortage of living spaces. Not being able to extremely overprice living spaces might sound glorious to some renters, but setting a price ceiling would create a bigger demand and there would be less housing supplied. With a price ceiling there would be less of a rush to build new living spaces as the revenue for people renting and building these spaces would not be as great as without the price ceiling. The short run and long run consequences would not be worth the risk. Therefore, the secondary effects this proposal would consist of would be too damaging to consider it a solution. The second proposal is that the governments should use subsidies or tax abatements to help builders or housing seekers. Although this proposal would cause a controversy, it would come in a limited amount. The reduced funds to government entities would be worth it in the long run. This proposal would definitely be the most effective solution especially if they chose to focus on smaller rental companies so bigger corporations would continue to focus on supplying more living spaces. Of course people will be unhappy, but that is always bound to happen no matter what. Overall, it would be worth the risks presented in the short run. It would allow lower income families to gain the growth they need to be able to pay back postponed payments in the future. Funds for government entities would begin to rise and equilibrium would be in the near future. A possible secondary effect might be if families choose to not pay back what they owe, but the government could easily see that they face serious legal consequences. This proposal would take the effort of all parties involved; therefore, it would make everyone accountable to help bring more equilibrium to the market. The third proposal states that the governments should do nothing to interfere with the market. Out of all three proposals this one seems to have the least potential for a solution. The government is responsible for its citizens and giving everyone the opportunity to “be well off.” Decisions like this are what shape the economy and country. If there is a greatly unstable market that shows no signs of changing, it is up to the government to step up. There are countless of secondary effects if the government chooses to do nothing to help bring equilibrium to the market. People would begin to distrust government officials. There could be many boycotts that would bring much more damage to other markets in the economy. If the government did nothing, they bring the potential to bring instability to many more markets not previously affected by the situation. Unstable markets have been known to bring much frustration for all parties involved. Reaching or maintaining equilibrium is not a one-step process. Various steps are required and simply setting a price ceiling or avoiding the problem will bring no solution. The proposal to make governments use subsidies or tax abatements to help builders or housing seekers would be the clear route. There should be no excuse for people to not repay debts and to remain unemployed. New businesses will open due to more demand and current ones will require a larger quantity of labor. The short run secondary effects of this proposal would bring the least amount of damages and in the long run would help bring a solution. 

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Proposals for the Oil Market. (2021, Oct 19). Retrieved from