Afonso Simões 12 CLC
Economic Practice Coursework
My choice of article is the one relating to the oil crisis in Libya, and how it affects the economy of other countries. The article discusses the impacts of the oil cut of Libya, supplying it no more. It starts off by talking about the impact on shares and the price of oil barrels, which is the fastest and direct impact of the oil cut.
As supply from Libya territory stops, supply to the entire world is crippled, as Libya is one of the countries that supply most worldwide used oil. As it stops supplying, it shifts the supply and demand graphs completely. In a short term, supply shifts to the left, as it is less. In doing so, for the same amount of oil, the price has gone to a higher figure. By doing that, the shares index of the western countries, such as European countries and the US have dropped, because of the adjustment via disposable income. That happens because of the effects of the shifting of the supply curve. As the price goes higher, the general public have less money to spend on the economy and firms, decreasing the firm’s profit, damaging that countries’ economy. That’s the reason for the index to go down, and that’s an example of mid-term effects of the oil crisis. In the midterm effect, the demand for oil will decrease, as people will cut back on the oil, and look for alternative routes.
