Noora Ali AL Hammadi

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Report about oil trade

1. Introduction.
The story of trade is one of the interesting stories that starting from the time when god created the
humans. At the beginning, the process of trade was so simple, bartering was one way people used in the
past. However, at the contemporary time, trade became so complicated as there were many laws,
organizations, corporations, variety of products and technologies. Trade is one of the important aspects
that clarified the state’s progressed. Furthermore, it plays a significant role i flourishing and growing the
economy. Over many years, trade has faced many problems, one of them was piracy. Many organizations
have been established in an attempt to overcome piracy. In my report, I will talk about trade in general
then I will focus on the oil piracy.

2. Discussion.
Over the history, trade was an important aspect that has describe the movement of the states toward the
development. In the discussion section, I will deal with two main ideas: the trade background and one
problem of the trade which is piracy. For each section, I will discuss some issues that I think are
important.

2.1 Background .
In the background section, I will talk about the trade in general such as trade reasons, world
developments that advanced trade, factors that led trade to move to the sea and the last point is the
factors have influenced trade at the present time.

2.1.1 reasons of trading

Since the ancient era, people realized the concept of trade, although the process that
they used to trade was different from the contemporary time. There are several
reasons made people from old and modern time trade. According to Gandolfo (1998),
there are five reasons of trading between countries but I will mention only three.
Firstly, the differences in technology. To explain this point, the countries can get
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some benefits from other counties, if other countries produce goods that they did not
produce. Secondly, the differences of the natural resources. If the countries have
variety of the sources that other do not have, the exchanging and trading between
countries could be used. For example, the UAE has abundant amount of oil while
chain has iron, both of these materials are important for development. Therefore, the
UAE trades with china to get iron. Thirdly, the differences in demand, the demands
are different based on the number of population and their preferences. For instance,
Chinese love to eat rice more than any other crops, so they require more rice than the
US. Another example is the Scandinavia counties need more wood as they located on
the arctic. As a result of this, they resort to import wood from other countries. The
Heckscher-Ohlin theory says that the trade played role in increasing the incomes of
individuals and state’s capital. To explain, by selling goods to the countries that does
not have those, they will gain a very huge revenues. Consequently, their income will
increase, so the standard of life will be better ( Nobelprize, 2006).

2.1.2 world developments that helped the growth of

trade.

Trade has advanced at the last few centuries, as many global developments
contributed in growing it. One of the global development is the trade liberalization. It
appeared in the 19th century as a result of the mass consumption and production as
well as modern corporations. It can be defined as the free trade without any
restrictions and supervisions. It encouraged all individuals to trade and do business
activities. Therefore, everyone can trade whether they are rich or in the middle class,
old or small and aware of trade or are not. It gives everyone chance to trade so that
they can increase their income and raise their livelihood (Rogowsky, Linkins, Tsuji,
2001). Another world development is the establishment of the trade organizations that
do many roles such as protecting the merchant’s rights, encouraging the trade to be
free as, removing the obstacles and solve trade problems between nations. World
trade organization is an example of the organization that do all roles that I mentioned
( World Trade Organization, 2009).
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2.1.3 Factors that moved trade from a land to a sea based

activity.

At the ancient time, merchants were trading by moving through the land from one
city to another. While at the 20th century, the situation changed. Trading by using the
sea has became active that is because of many reasons. One of these reason is the
natural resources that available in the deep of seas. There are many resources that are
available in the abundant amount in seas such as petroleum, sea salt, fishes and
elements such as phosphate. Those resources created new functions and capital, so
many merchants turned to seas. Another factors is the cheap taxes and coast of the
water transportation comparing to the land transportation. Water ways Council
estimated that the cost of the water transportation is less than any transportation by 5
percent. Additionally, it says that water transportation carry large amount of products
equal the amount that can be carried by more than 40 trunks.(HighBeam Research,
2008). The last reason is the technologic innovations such as steamships that helped
the trader to move a huge capacity of cargoes.

2.1.4 Some contemporary day factors that influence

trade.
As the trade has developed at the last few centuries, it has faced many influences
including the taxes and Natural physical features. Every goods has different taxes.
One of the well-known taxes is the tariff that imposed only on the imported
productions. The main reason for imposing tariff is to collect revenues that could be
used later in different ways by government. Tariff depends upon the good’s price, if
the price is high, the tariff raises and the opposite is true. The problem appears when
the price of the products raises. That means tariff will increase resulting in limiting
the imported goods. The second factor that has affected on the trade was the Natural
physical features including the rivers, mountains and off road. Those consider as
obstacles in the path of the traders as they make transfer the cargoes hard.

2.2 Oil Piracy

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Since the discovery of oil, the pirates started stealing it as it brings a huge wealth. The history of
oil piracy does not have a long history as other products have because it was discovered in the last
few centuries. Oil piracy has been one of the biggest problem that trade faces currently. According
to the International Maritime Bureau’s Piracy Center (PRC), the oil piracy attack raised and its
jobs have been obvious since 2008 ( Ismail, 2009).

2.2.1 Origin of the oil.

Oil has a great history, it was used firstly for the medical and building purposes by
Babylon. The first oil well was dig in the western Pennsylvania in 1859. Since then,
the production of oil flourished an it has spread everywhere where oil could be found.
After the world war II, Medial East became the major production of oil. Oil is
collection of dead animals, plants and other organisms. oil was known as the black
gold because of its benefits. Currently, oil almost are used in all field, including the
transportation, generating electricity and in producing goods ( Fossil Fuels
Organization, 2004)

2.2.2 Reasons for popularity of oil.

Oil gained popularity because it is one of the natural resource that can be found in
many places and the benefits he gave to people. Oil made the life easies as it is used
in producing several goods. For example, it is used in manufacturing medicals,
especially skin medicals. Also, it could be used in cosmetics. Another use of oil is in
cleaning, producing foods operating machinery and generating electricity which is
considered one of the most important gains we got from the oil. Therefore, we can
say that because oil raised the standard of living, it became popular.

2.2.3 Problems encountered in oil production.

Oil’s production did not face so many problems because of the technological
machines people used to produce it. However, there are some problems related to the
nature of the region. Sometimes, landslides happen during the drilling of the wells
that make the production of oil difficult. The other problem is raising the sea’s level.
This problem makes the machines reach to the deep of the sea difficulty ( Bloch ).
The last problem I would like to mention is that the high cost of the production. This
is because the tools must be under maintenance which also costs much money.
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Bloch

2.2.4 Overcoming the oil piracy.

Many of the solutions has been put forward to solve oil piracy, particularly, the one in
Somalia coast. One of the is solutions a massive international effort done by
cooperating between all nations. The Obama administration played roles to get rid of
piracy, some solutions he mentioned are security treaty between the UN and the
Somali government. Therefore, American can help them through sending Naval forces
to the Somali coasts which will fight against pirates. Formatting Somali navy that will
provide protection to their own water(Arman, 2009). Another solution is imposing the
law and punishments to the groups that practice piracy. Consequently, the proportion
will decrease. Additionally, those pirates must be exposed at the media to make other
pirates fearful of practicing this bad work.

3. Conclusions.
To sum up, trade over many years became one important aspect of civilization. Therefore, communities
have tried to improve it and got rid of the problems that trade faced. There are many reason made people
trade. Also, there many reasons made trade transferred to seas while after that it was only on the land. Oil
piracy is one of the problems trade faced and which became common, especially, in the Somalia
coastline. So that, global efforts are done to overcome piracy and its effects toward oil and trade.

4. Recommendations.

Piracy which is one of the visible action that started from ancient time until now and became so active
especially over oil ships. Piracy problem need to be solved because if people did not try to solve it, the
number of pirates will increase and that led to many serious problems that affect trade. The most
important and effective solution is that all states should participate in dealing with this issue through
cooperating together with Somalia government against the illegal group that have practiced piracy. So, if
the pirates recognize the efforts that will be done, they will reduce their struggles and operations. Another
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way is that putting guards over the coastline of Somalia. Therefore, they could protect the oil vessels that
pass across the seas. These coastguards also should fight against those pirates. The government must
provide them with the advanced weapons, so that they could defeat them easily. Furthermore, the
Somalia government must stop the war in Somalia if they really want to stop piracy because if they halt
war, they could focus more on the piracy problem.

5. References
Arman, A. ( 2009 April, 29). Non-Military Solutions to the Somali Piracy Dilemma.
World PRESS. Retrieved December 20,2009 , from
http://www.worldpress.org/Africa/3342.cfm

Bloch, D. (n.d). Salt Mirror and Petroleum. Retrieved December 20,2009 , from
http://www.salt.org.il/geo.html

Fossil fuels organization. (2004). History of the Oil. Retrieved December 20,2009,
fromhttp://www.bydesign.com/fossilfuels/links/html/oil/oil_history.html

Gandolfo, G. (1998), International Trade Theory and Policy. Roma: Springer.

Nobelprize. (2006). Why Trade. Retrieved December 17, 2009 from

http://nobelprize.org/educational_games/economics/trade/ohlin.html

HighBeam Reaserch. ( 2008). Water Transportation of Freight. Retrieved December

17, 2009 from

http://business.highbeam.com/industry-reports/transportation/water-
transportation-of-freight-not-elsewhere-classified
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Ismail , A. ( 2009). Piracy Grows to Record Levels. Retrieved December 20,2009 ,

from http://allafrica.com/stories/200901160618.html

Rogowsky , A., Linkins , A., & Tsuji , S.(2001).The Center for Strategic and
international studies. In S. Weintraub( ED). Trade Liberalization fears and
facts(pp. 3-29). US: Greenwood Group.

World Trade Organization. (2009). What is the World Trade Organization. Retrieved
December 17, 2009 , from
http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact1_e.htm