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    islam199797's Avatar
    islam199797 Posts: 1, Reputation: 1
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    #1

    Feb 19, 2017, 02:27 AM
    Shale gas and oil technology innovation of 2014 has increased the world supply of cru
    Shale gas and oil technology innovation of 2014 has increased the world supply of crude oil, and the retirement of baby boomers starting in 2013 (along with stagnation in Japan and Western Europe, and slow-down of growth in china) is serving to reduce global demand for crude. What do you expect will happen in his market for crude oil as a consequence?

    a. Equilibrium price will arise, but the effect on quantity traded is uncertain

    b. Equilibrium price will fall, but the effect on quantity traded is uncertain

    c. Equilibrium quantity traded will arise, but the effect on equilibrium price is uncertain

    d. Equilibrium quantity traded will fall, but the effect on equilibrium price is uncertain

    e. Equilibrium price and quantity traded will both fall
    joypulv's Avatar
    joypulv Posts: 21,593, Reputation: 2941
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    #2

    Feb 19, 2017, 04:10 AM
    The technology has been getting better over many years, with a further cost reduction in 2014. As a baby boomer myself, I keep my house warmer, but drive less, so I see no big change, and neither do my friends, so what's that about? Slow down of growth in China is just the RATE of growth. Still growing. They are plenty of other factors, such as the enormous reduction in airplane fuel needs as planes are being made with carbon fiber based materials. Increasing demand from emerging nations. As the Arctic melts, countries are fighting for rights to oil over their borders, currently off-limits per agreements handled by the UN. Political upheavals will have unknown effects, big ones. Just something like a new oil minister in an oil rich nation. Saudi Arabia still holds most of the cards, with the cheapest production costs in the world.

    So there's production costs, demand, and totally unpredictable politics.

    Anyone who thinks they can predict past a few months is a fool.

    Anyway - which one would you choose? Your professor doesn't even mention a time span!
    My short term answer would be d. Prices are still pretty low. I don't think there's a wrong answer, because the premise is somewhat debatable. Plus there's no choice for both staying the same.
    talaniman's Avatar
    talaniman Posts: 54,010, Reputation: 10852
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    #3

    Feb 19, 2017, 08:15 AM
    An argument can be made for all but what do you think, and why?

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