Adrian’s Supply and Demand Assignment

Market: Oil


After an OPEC agreement to reduce global oil production by close to 2 million bpd, economists expected the price of crude oil to increase above US$60, which would have solved a lot of problems. Instead, the price of oil has only gone up above US$50 per barrel. Originally, the oil prices dropped because there was too much supply. Now, the price of oil is slowly going back to equilibrium, but the supply is still higher than demand (4th year in a row). Since the supply is higher than the demand, the price of oil is lower than at equilibrium, and the curve is shifted to the right. The supply determinant responsible for the decrease in price is number of sellers. haha2


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