Saudi+Arabia+May+Expand+Oil+Production+To+Meet+Global+Demands


 * Title **: Saudi Arabia may expand oil production to meet global demands


 * Date **: April 22, 2011


 * Source **: http://english.alarabiya.net/articles/2011/04/22/146355.html


 * Explanation **: Oil production in Saudi Arabia has expanded due to the rising demands in China, India, and Middle East. Even though the rising demands might be good for the economy and economic growth, Saudi Arabia is deciding if the kingdom should raise oil output capacity beyond its current condition. Below is a graph happening to Saudi Arabia. The product, oil, has gained a lot of demands; this will move the demand curve to the right, and both the price and quantity will increase.

- Demand- Quantity of a good or service that consumers are willing and able to purchase at a given price in a given time period - Production- The action of manufacturing something - Supply- Willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period - Economic Growth- An increase in the real output of an economy over time - Sustainable development- Development that meets the needs of the present without compromising the ability of future generations to meet their own needs - GDP- Gross Domestic Product- The total value of all final goods and services produced in an economy in a year. GDP= C+I+G+ (X-M) - GDP per capita- Total GDP divided by the size of the population
 * Vocabulary: **

I don’t think that Saudi Arabia should expand oil production because they need to sustain their natural resource, oil. If they use up their resources too quickly, then this will stop growth from taking place in the future. So instead of expanding the production of oil, the government could also limit the supply by applying a quota to the market. This will restrict the supply so that it does not exceed a certain quantity (shown on the graph 1 below, the supply cannot exceed Q1), and it will also restrict the country from using all its resources too much at a time. However, if the Saudi Arabia government does want to expand the oil production, the government should put a maximum price in the market (shown in graph 2). The government is able to shift the supply curve to the right (S to S2) by subsiding, or using its own storage of oil because this would satisfy the problem of excess demand. However, the problem with this is that the government has to reduce expenditure in some other area, such as education or health care, due to opportunity cost, and also imposing a maximum price will not help sustainable development.
 * Graph **
 * Evaluation **

Graph 2:

Graph 3: