http://news.bbc.co.uk/2/hi/business/6399117.stm
This is an article on the ever rising price of oil. This time it is the sweet crude oil that turns out to be a type of petroleum that contains less than 0.5% sulfur. That makes it sweet, compared to a higher level of sulfur in sour crude oil.
Back to the story... The weather is also a factor that influences the local demand for heating oil. It is not surprising, that when a snow storms hit the biggest consumer of oil - US, the price of oil goes up. This is a natural rise caused by a shift of the whole demand curve. What intrigued me in the article is the OPEC policy to cut the supply of oil during the winter time. Not only the demand is higher but the supply is also smaller. Those facts combined with an unstable situation in Middle East, are the cause of the rise in price. It is just a shift of a line on a graph, but has such serious consequences.
The article also made me think about how important the price of oil is for the world economy. The statement that we live in an oil era is not exaggerated. The VC of most of businesses is depended on oil price. That means that it doesn't only influence the cost of using our cars but the price of every good or even service that we pay for.
4 comments:
I learn so much from you guys! I never knew there was a difference in crude oil.
Excellent analysis - increased D + increased S = much higher prices. The glory of an oligopoly is that they can manipulate the prices to get the ultimate (or what they hope is the ultimate) in profits for themselves.
You're absolutely right - the world economy runs on oil. Sad, isn't it? One small group could totally ruin an entire economy (or economies).
Great job!
i think you brought up a lot of good points that a lot of people seem to over look. like how it's just a line on a graph but we forget about the consequences. and how we don't just use oil to make our cars run but entire companies use oil every day to produce things. i think it really shows how much we take for granted!
really makes you wonder why we aren't doing more to reduce our dependence on oil--not just foreign oil, but all oil. imagine the freedoms from price swings. granted, everything would probably be more expensive in the short run, but the potential long run benefits seem worth it.
Wow, the article really summed up alot of the main points that affect our economy and I really learned how much we depend on oil for everyday use. Also, I learned how an Oligopoly can work the segments of its business (i.e. price) to its benefit.
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