Download Oil Exercises - WordPress.com

Supply, Demand, and the Price of Oil
The recent turmoil in the Middle East has drawn increasing attention on the price and stability of oil..
There is a scarce amount of oil in the world. So, like all goods and services, the price is determined
by supply and demand. =
Supply: The amount available to buy and consume
Demand: The amount desired to buy and consume
*Prices are determined by a combination of how much consumers are willing and able to buy
(_______________), and how much producers are willing and able to provide for sale
(_________________).
This is a graph of how these two interact to impact prices:
When prices go up, quantity
demanded goes _________.
When prices go down, quantity
demanded goes _________.
When prices go up, quantity
supplied goes __________.
When prices go down, quantity
supplied goes __________.
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
Is it possible for more than one of these scenarios to occur at the same time?
What would happen if scenarios 8, 9 and 10 occurred at the same time?
Examples:
A) Hurricane Rita hits Texas and destroys America’s oil refineries. _______________
B) New oil reserves are discovered under Fairfield, CA. _______________
C) Millions of teenagers get their driver’s licenses. ______________
D) Hummers go out of style. _____________
Problems:
1) The world population is growing, so is the number of drivers (vote on result).
2) Each year, less and less oil is found in the ground (vote on result).
3) A law is passed allowing oil companies to dig in the Arctic National Wildlife Refuge in Alaska.
4) President Bush accuses Iran (an oil producing country) of developing nuclear weapons, and preemptively
bombs Tehran, Iran.
5) In response to Bush’s preemptive strike on Iran, OPEC (the Organization of the Petroleum Exporting
Countries) stops selling oil to the United States.
6) A new law requires that 50% of all new cars sold must be either hybrids or use a fuel other than oil.
7) More people start carpooling and using mass transit (improve trains, subways, busses etc).
8) Hurricane Steve destroys American oil refineries in the Gulf of Mexico and in Houston, Texas.
9) Terrorists destroy oil refineries in Saudi Arabia, one of America’s biggest suppliers of oil.
10) Millions of Indian citizens become rich enough to buy cars.