Benchmark+oil+rises+to+highest+price+since+January+by+Medha+Menon

//**REMEMBER: DO NOT SUMMARIZE THE ARTICLE!!!**//

=TITLE OF EXTRACT:= Benchmark oil rises to highest price since January =SOURCE:= http://www.shanghaidaily.com/article/?id=494663&type=Business

=DATE EXTRACT WAS WRITTEN:= 18th February, 2012

=DATE CURRENT EVENT WAS WRITTEN:= 23rd February, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= 1. Oligopoly Assumptions: - many firms, though a small amount of the firms actually earn most of the profit in the industry - similar, but not identical products (focus on brand name) - strong barriers to entry and exit - interdependent (collusive) 2. Elasticity How responsive the demand for a product is to its price. PED - low availability of substitutes, necessity, urgent to purchase. 3. Supply and Demand demand - how many people are willing and able to buy a product at different prices law of demand - as price increases, quantity demand decreases (and vice versa) determinants of demand (non price factors) - income, substitutes/compliments, number of consumers, expectations, fads supply - how much of a product a firm is willing and able to sell at different prices law of supply - quantity supplied increases as price increases determinants of supply (non price factors) - costs of production, technology, number of producers, substitute producer goods, government action

=VOCABULARY TERMS AND DEFINITIONS:=
 * embargo - ban on trade with a country

=DIAGRAMS:=

=EVALUATION:= SETS THE SCENE FOR THE ARTICLE: __1. Oligopoly__ The oil industry is an oligopolistic market scheme - " The European Union, which buys 18 percent of Iranian oil exports.." (shows how there is a concentrated income for Iran) __2. Elasticity__ Oil and other fuels, are relatively inelastic, meaning the people have to adjust their lives to the increased prices of the product. ""When Brent gets north of US$120, it starts to inspire some fear" among investors that the prices have risen too high, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service."

THE ISSUE OF THE ARTICLE: __1. Supply and Demand__ SUPPLY: (TO THE US) Determinants of supply: increase in cost of production Here the cost is not a monetary issue, but rather an anticipation of conflict between the supplier of a 'part' of the product - relationships with Iran may cause a shortage in oil supply in the spring. The determinants of supply cause the decreasing shift in the supply curve, effectively raising the price and deterring demand (Law of Demand). "Benchmark US crude rose 93 US cents yesterday to end the week at US$103.24 per barrel in New York. That eclipsed the previous high for the year of US$103.22 set on Jan. 4." DEMAND: (FROM THE EU) Determinant of demand: Government Intervention due to the 'Nuclear Energy Program Issue' (excuse for retaliation against oil prices) Decrease in demand was due to " The European Union, which buys 18 percent of Iranian oil exports, plans to **embargo** Iranian oil this summer." DEMAND: (FROM THE US) Determinants of demand: increase in income Due to the decrease in unemployment rates, more people are making money, thereby giving them the opportunity to buy more oil. "a series of economic reports this week pointed to a stronger economy and increasing demand for oil. Hot on the heels of a drop in unemployment claims reported Thursday..."