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Internal Assessment: Slippery slope

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Introduction

The slippery slope The article The slippery slope from The Economist (06/09/14) describes the Price of oil crude oil is something insecure on today's market. The price rises and falls. Lately it has fallen to its lowest since March this year, but the oil price is still higher than when the Organisation of the Petroleum Exporting Countries (OPEC) raised their production quotas last year. This article's main link to the syllabus is to section 2 and the law of demand and supply. Because the producers supply crude oil to the consumers which demands the crude oil, and all this happens on a market which is a place where consumers and producers meet to exchanges goods and services. Demand is the quantity bought at a particular price over a particular time period and supply is the quantity a producer is willing to produce at a particular price over a particular period of time. ...read more.

Middle

The law of supply instead states a positive relationship between quantity supplied and change in price, which is why the supply curve is positive. The demand of crude oil from Asia has grown since the incomes have increased and people therefore can afford to buy cars and other things that need oil as fuel. This demand from Asia has had a great impact on the price of crude oil. At the same time as the there is a growing demand from Asia on oil, the supply from places like Iran, Nigeria and Venezuela is uncertain and could easily decrease. In the diagram below, diagram 2, we can see everything that also happened in diagram 2, We can see how the increasing demand of oil from Asia made the demand curve shift to the right and the equilibrium point move from A to B ...read more.

Conclusion

A dramatic disruption of the supply from Iran, Nigeria, Venezuela or Iraq should make a big decrease in supply since these countries, each and single one produces more than what the International Energy Agency (IEA) has considered OPEC to have in spare capacity. This since the spare capacity of OPEC is just over 2% of the global demand. The theory of demand and supply is quite reliable since an increase in price of a specific good or service could easily decrease the demand of that specific good or service at the same time as the will to supply will increase, since you can earn more. But in the case of crude oil a change in price would not effect the demand as much, this because in today's world crude oil is something we need in different ways. ?? ?? ?? ?? ...read more.

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