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%