Chapter 2 Blog, Supply and Demand. Missing out on your education if you don't read this.

Chapter 2 Blog, Supply and Demand

Oil prices fall below US$58 on reports of rising supply, falling demand

Brad Foss
Canadian Press

Friday, November 11, 2005

The price of crude oil has dropped due to the law of supply and demand. On Thursday, the price of crude oil has dropped below $58 a barrel. The justification of the decline in oil price is due to warmer than usual winter expected in the US. Reports show that the price can drop to mid-50s per barrel and the declination will probably terminate in late december, assuming normal winter temperature. The phenomenom in reduction in oil price is a result of low demand and high supply. The data is released by the U.S. Energy Information Administration.

Relation to chapter 2.

Since oil is inelastic, a subtle change could cause a significant result. As we can see, a simple prediction by the U.S. Energy Information Administration can affect the price of oil. The prediction states that since this winter will be warmer than other ones, the demand for energy will be lower than other winters. When the supply is unaltered and the demand decreases, a decrease in price is seen. If oil was elastic with many substiutes, the price would be non-chalant about the impending change in demand. In the future, we should be expected to see substitues for crude oil, such as oil sand. This will slowly pull crude oil from being inelastic to more elastic.

Chapter 1 blog, this is some deadly shit, GOTTA READ THIS

Chapter 1: Scarcity

Michael Fumento:
Oil sands may leave petroleum spigots open for 500 years
By MICHAEL FUMENTO

Columns - October 31, 2005

The protoleum amount in the world is heading to the point to utter depletion. The proof can be seen at the outrageous high price. Industrializing countries like China and India play roles in the inflation of the price as well. Yet, this doesn't mean it's the end to the world's oil supply. Another source of oil can be obtained through the extraction of oil sands. Since the world has plentiful of oil sands, frequent exploitation of this resource will force the petroleum price to calm back down. In fact, the world has so much oil sand that Canada's oil sand alone is capable of producing oil barrels equal to the amount all the oil reserves in Saudi Arabia can produce. The usage of oil sand is not frequent because the process and extracting and converting is quite costly. Infrequent usage of the process makes the cost of the process more expensive than the oil that come out of the process. Fortunately, the high price of petroleum has promoted the investment to oil sand extracting companies. In the near future, we should see cheaper oil, rather good news for the entire world. Though the amount of oil that can be produced from the extration of oil sand may seem plentiful, the amount can last the world for estimately 500 years.

Relation to Chapter 1: Scarcity

Scarcity refers to anything that has a limited amount. Almost anything in the world in scarce, depending how you view it. Even sunshine it scarce because the sun will run out of energy and die in a matter of time. It will, however, definitely last us for our life time.
When the word scarcity enters most people's ears, the instant thought that will dart up is oil. Oil is in a huge demad ever since the Industrial Revolution. Nowaday, all the things that make our life more comfortable and convenient requires the usage of oil to provide energy. This includes cars and air condition and heating system in our homes. Oil in so important that its demad is seen globally.
With our world's reliance on petroleum decreases, the price will as well. Yet, this will mean we will turn to rely on other source of energy. So, the energy the article discusses, oil sand, will be our next stop for energy. The demand for it is not high, but give it some time and you can see explode like a grenade.
Though the amount of oil sand may seem quite plentiful, it will run out sometime in the future. The reason being is that oil sand, like anything in the world, is scarce. Us, humankind, should not rely sheerly on one source of energy. It's our heavy reliance on petroleum that makes the price high. In the end, oil sand may seem like a temporary solution, its scarcity will make it not eternal. The question is, what's the next solution after oil sand?