Oil price hitting 11 year low

Part of the syllabus: Microeconomics
Source: BBC
Date of the article: 2015-12-21
Link to article: Oil price: Brent crude hits 11-year low
A superb Economics Internal Assessment article Microeconomics about falling oil price

Possible talking points:

 

  • You can use exact prices on your diagrams

 

  • Explain what is oversupply (hint: supply curve shifts) and how that leads to falling oil price (remember to explain contraction/extension of different curves)

 

  • You can then analyse how it affected the oil producers themselves:
    • Squeezed profit margins are even mentioned in the article, how can you demonstrate that on a diagram?
    • How could that affect investment in research and exploration?
    • What is likely to happen to future supply if the investment changes?
    • See what the article mentions about future supply and more oil coming into the market, is it possible that smaller firms will be forced to shut down?

 

  • Talking about cheaper fuel:
    • Could that be a change in the standard of living?
    • What is the price elasticity of demand for fuel?
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