Examine the following variables that could affect the price of oil:
a. Tax credits were offered for expenditures on home insulation.
b. The Alaskan pipeline was completed.
c. A supposed ceiling on the price of oil was removed.
d. A new, very large deposit of oil was discovered.
e. Buyers in large numbers all of the sudden started driving large sport utility vehicles. f. The use of nuclear power suddenly decreased.
Choose any two of the above variables, and describe how your selections would affect oil prices based on the supply and demand analysis
its not a paper. You just have to choose 2 of them and answer it.
Answer preview
In most countries, many people and industries own vehicles and machinery that uses petroleum products. As a result, demand shocks have been happening now and then because the rate of oil usage has been higher than the rate of supply. According to Jadidzadeh and Serletis (2017), demand shocks cause oil prices to increase, especially when the demand pf oil increases while the supply remains stagnant. Also, supply shocks have been happening when some oil extraction points get depleted. In order to maintain or reduce the price of oil, the supply has to increase with increasing demand. Therefore, having a new and substantial deposit of oil discovered, the price of oil could automatically drop. It is because the discovery of new oil deposits could provide additional supply. This could make oil prices drop when the amount increases or equals the demand.
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