Oil+below+108+as+weak+demand+picture+offsets+Iran+by+Patrick

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

TITLE OF EXTRACT:
= Oil below $108 as weak demand picture offsets Iran  =

SOURCE:
http://news.yahoo.com/oil-below-108-weak-demand-picture-offsets-iran-060214677.html

DATE EXTRACT WAS WRITTEN:
Feb 29, 2012

DATE CURRENT EVENT WAS WRITTEN:
March 7, 2012

EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:
Prices of oils are somewhat high throughout the Asia market right now. According to the law of demand, as the price of oil increases, the quantity demanded of oil decreases. It is said that the price of a barrel of brent crude hit $123.48 USD in London on Feb 29, 2012. However, the prices are slowly dropping down. Many fear that the ultimate reason this may be happening is because there might be a supply disruption for oil in the West and Iran over its nuclear program. However, it is evident that Iran was unlikely to cause real threat to block the Strait of Hormuz, where many of the world's oil tankers pass everyday. It is also said that the market for oil will continue to experience a decreasing demand the ongoing economic fragility in Europe. This will then help the market and help to stop with the price hikes. This happens because the economy of a country can directly affect the factors of production, and thus, the price of oil on the market will also drop. Also, supply would increase because there would be a possible release of oil by the International Energy Agency. This release could ease the high oil prices of global economy. According to the law of demand, if the price of a product is increasing, the demand for the product will decrease. This is what is happening right now; since the price of oil is very high right now, there is little demand. Thus, by lowering the prices in any way, the demand of the product will increase.

VOCABULARY TERMS AND DEFINITIONS:

 * Supply - the amount of a goods or services a producer is willing and able to produce.
 * Demand - the amount of a goods or services a consumer is willing and able to buy.
 * Market - a supply and demand for a particular commodity or service
 * Law of demand - as the price of a product increases, quantity demanded decreases
 * Global economy - international economic activity which includes the world-wide integration of markets
 * Factors of production - the inputs necessary for producing a good or service (capital, labor, management, land)

EVALUATION:
Prices of oil and barrels of brent crude are still high in the market. To fix and improve this situation, a few things can be done. Firstly, the price of oil could be lowered, This is possible through many ways such as the degrading of an economy, like Europe, or it could also be achieved by subsidizing countries and oil companies throughout the entire world. Since the demand of oil is not necessarily so high yet, because of Iran's "threat", the governments around the world could also impose a price ceiling, which provides a limitation to how high the price of oil can be, so that the quantity demanded can raise and the quantity supplied will decrease from their original state. For a short amount of time, the price ceiling will not cause a shortage, because currently, the quantity demanded is not so high and it would take time to normalize. The governments around the world could also just increase the supply, so that the quantity demanded will grow and the price would go down.