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.
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.
posted by Ben Wong @ 12:08 AM
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