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Oil prices hit two-year highs

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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. ...read more.


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. ...read more.


In conclusion, this increase of the price in oil mainly because of the fear of war with Iraq will cause serious problems in the worlds economy. This is because oil is the most important source of energy for industrialised countries most of which don't have their own supplies and have to import them. These high prices will increase the costs for companies and consumers and therefore will cut down the profits or extend losses. Many people have warned that military action will push up the price of oil and as we can see, even before the military action has taken place, the price of oil is already rising. Word Count: 417 1 www.bbc.co.uk 2 Quantity demanded is greater than quantity supplied. ...read more.

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