Part of the syllabus: Microeconomics
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?