Commentary #: 2
Name: Ana Merino
Class: 11 St.
Date: February 10th 2003
Word Count: 417
Title of Article: Oil prices hit two-year highs
Source: BBC News Online 7/02/2003
Section of Syllabus: 1.2 Resource Allocation in the Market
Commentary
With the imminent attack on Iraq and the strikes in Venezuela, price of oil has gone up drastically. In these past months the price of oil has gone up due to various causes. One of the reasons is because of the cold winter in the US, stocks of heating oil and gasoline are falling heavily and fuel distributors are beginning to store supplies ahead of a possible war. This is another of the reasons why the price of oil is increasing. Many people think that the attacks on Iraq are forthcoming and the associated risk of unsettling supply has made the price of oil ascend. The third and not less important cause why oil has gone up so much is due to the recent strikes in Venezuela. Venezuela, the fifth largest oil exporter has undergone important strikes which have interrupted production and therefore the exports (the US imports 13% of its oil from Venezuela). The supply, which in economic terms is defined as the quantity of goods that sellers are prepared to sell at any given price over a period of time, has decreased in these few months because of the reasons mentioned above, this has caused the price of oil to increase. This can be seen in the graph below, as there has been less supply of oil, the supply curve has shifted to the left causing the price to go up from P1 to P2.
