Chapter 2
“Oil prices rise ahead of weekend” – Vancouver Sun on June 16, 2006
The oil prices continue to rise in New York and there are concerns on the demand and the prices from rising above $75 US a barrel. It is a fact that the central bank would face problems on inflation. If the price of oil keeps rising, it could hurt fuel demand. Analyst, John Kilduff has mentioned that the factor that keeps the prices up isn’t supply, it’s demand. The International Energy Agency changed its prediction for growth in demand during 2006 to 1.24 million barrels a day from 1.25 million barrels a day. It is reduced by 30 percent from its growth estimate in January. Oil supply from Africa and the Middle East is also a cause of the inflation. Also, prices have been inflated for months by concern over the nuclear program of Iran, which has seen its output of 2.5 million barrels daily cut about 20 percent by militants. The development between the United States and Iran caused prices likely to stay in the $68 to $72 a barrel range. Another factor affecting oil prices is the threat of weather. For example, the threat of hurricane season and unseasonably high temperatures in some parts of the United States are raising expectations for high gas and power demand starting in fall. Natural gas supply is at its highest level ever for this time of year.
Relationships to Chapter 2 – supply and demand (oil)
This articles refers how gas demand is rising and how the interaction between supply meets the demand of the public. We know from chapter 2 that factors that cause prices to increase could be the demand is increased, supply is pinched, profit margins are low, substitutes for the specific resource, etc. What the article says is that demand is rising, even though the amount of oil production remains the same, prices are still on the rise. The only reason that can explain this is because of demand. We simply want more oil everyday for energy. And thus if we keep the supply constant, demand for oil will rise and so does the price. In this case, the tense situation between the United States and the Middle East will also cause the price of oil. Another factor could be weather too. In this article, they mentioned the demand of oil in United States will increase because the weather will get cold and people require more energy, such as oil. In summer, the demand of oil will decrease. For example, the threat of hurricane season high temperatures in some parts of the United States are raising expectations for high gas and power demand starting in Fall. I think since oil is still inelastic in the world, the change of demand might be still constant but as prices still rising up, there will always a point where oil will become more elastic because other resources can be replaced oil.
http://www.canada.com/topics/finance/briefing/story.html?id=7da107bf-fd61-4bfd-8b72-410185e68a34&rfp=dta
posted by jenny_yeung @ 12:09 AM
2 Comments:
Jenny!! It is so true that during the winter our hydro bill is so much more expensive than those in the summer. It's all because of the high demand. Those people are so smart. They know when to increase the price. I personally think oil is a bad resource because it creates so much pollution, which contaminates our air and water. Isn't there better sources like renewable ones? Even though it might be more expensive, i think it is still better than oil. At least it doesn't harm our health.
I agree with you and Winifred said, the winter hydro bill is way more expensive than summer. For some reason not only the hydro bill, my phone bill, and all these other bills are so much more expensive too. Maybe it is because the weather is so cold that caused me to always stay at home. Therefore, all the bills are so much more expensive. (Turn on my heat, cover myself in blankets, then start talking on the phone for the whole Christmas break)
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