Demand and Supply of oil

Question 1

oil important because

Answer 1

used in production of lots of goods

used in transportation

Question 2

increase in price of oil can

Answer 2

result in inflation.

price of good increase.

Question 3

oil prices

Answer 3

fluctuate widely.

Question 4

demand for oil is

Answer 4

price inelastic.

Question 5

supply of oil is

because

Answer 5

price inelastic

difficult to increase the supply of oil in the short term

exploration for new wells + production from um takes time.

Question 6

factors that affect the demand for oil

Answer 6

state of the economy

speculators (people who buy oil cheap and try sell high)

the value of the US dollar (OIL PRICED IN US dollars)

demand increase for products made of crude oil (derived demand)

attractiveness of buying oil substitutes. decreases demand.

weather conditions (heating)

improvement in living standards oil demand increases

Question 7

the value of the US dollar factor affecting oil demand

Answer 7

oil priced in US dollar. value of dollar low more oil can be bought by speculators holding other currencies.

Question 8

factors affecting supply of oil in short term

Answer 8

supply-side shocks

Organisation of petroleum exporting countries. have significant control over the price of oil. OPEC can cut oil production levels or increase them.

Question 9

factors affect supply of oil in long run

Answer 9

size of remaining oil reserves

the cost of extracting oil from reserves

efficiency and cost of technology used in exploiting and refining the oil

Question 10

size of remaining oil reserves

Answer 10

bigger they are higher supply of oil in the long run.

Question 11

cost of extracting oil from reserves

Answer 11

some too expensive, demand and oil prices increase might be worth to extract it.

increase in price, demand cause increase in oil exploration for new reserves.