Journal unit 5

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Feb 20, 2024

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The purpose of this assignment is to identify the factors that led to an increase in oil prices. Please read an article on the topic in The Wall Street Journal or any other scholarly reference and address the following points: 1. What are the factors that led to an increase in the current oil price? 2. Do these factors cause a shift in demand or supply? 3. Would this cause a shortage or a surplus of oil in the market? 4. How did the U.S. government intervene to stabilize the market in the short run? Your journal should consist of a minimum of three paragraphs. Use APA format for your reference and in- text citation. The geopolitical tensions in Ukraine and the sanctions imposed on Russia are recent instances that have caused significant impact. In light of these situations, there has been a heightened apprehension regarding the global oil supply, leading to an increase in oil prices. In order to bolster prices, the OPEC+ coalition has recently implemented a decrease in oil production. Nonetheless, this measure has proven insufficient to offset the surge in demand, leading to a consequent escalation in costs. Oil demand changes as a result of rising demand. Oil prices will climb as demand rises. This is so that vendors can charge a higher price because there isn't enough supply to satisfy demand. Oil production and demand might change as a result of geopolitical unrest. Oil supply will change, and the price of oil will increase if tensions cause a disruption in production. If tensions result in a spike in oil demand, there will be a change in demand and an increase in the price of oil. Changes in production lead to changes in the oil supply. Reduced output results in less oil being sold, which raises the price of oil.

Would this cause a shortage or a surplus of oil in the market? A lack of oil on the market may be brought on by both increased demand and geopolitical unrest. Oil prices will increase if supply cannot keep up with demand. A surplus of oil on the market could result from production reductions. The price of oil will decrease if there is a surplus compared to the amount that is needed. How did the U.S. government intervene to stabilize the market in the short run? Through the release of oil from the Strategic Petroleum Reserve, the U.S. government acted to stabilize the market in the short term. As a result, oil prices have decreased and the availability of oil has increased. The intervention's long-term implications, however, remain unknown. Other factors that can affect oil prices In addition to the factors mentioned above, there are a number of other factors that can affect oil prices. These include:

Weather: Extreme weather events, such as hurricanes or oil spills, can disrupt oil production and transportation, which can lead to higher prices. Technological advances: Technological advances in the oil industry, such as fracking, can lead to an increase in supply and lower prices. Government policies: Government policies, such as taxes or subsidies, can also affect oil prices. Conclusion The price of oil is a complex issue that is influenced by a variety of factors. The factors mentioned above are just some of the most important ones. It is important to monitor these factors in order to understand how they might affect oil prices in the future. _____________________________________________________________________________________ ____________________________________________________ Additional Information The increase in oil prices has had a significant impact on the global economy. It has led to higher transportation costs, which have increased the cost of goods and services. It has also led to higher inflation, which has made it more difficult for people to afford basic necessities. The U.S. government has taken a number of steps to try to stabilize the oil market. In addition to releasing oil from the Strategic Petroleum Reserve, the government has also imposed sanctions on Russia, which has further disrupted oil production. It is unclear how long the current high oil prices will last. However, it is likely that they will continue to have a significant impact on the global economy for the foreseeable future.

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Factors causing oil price increase: 1. Reduced OPEC+ production (supply decrease) 2. Increased Chinese demand (demand increase) 3. Ukraine war and sanctions (supply disruption) 4. High inflation (increased costs) Result: Shortage in the oil market. U.S. government intervention: Released 1 million barrels/day from the Strategic Petroleum Reserve to stabilize prices, urged OPEC+ to boost production, but limited short-term impact expected due to ongoing global factors. Step-by-step explanation What are the factors that led to an increase in the current oil price? The following factors have contributed to the increase in the current oil price: - Reduced production by OPEC and its allies: OPEC and its allies, known as OPEC+, have been reducing production since 2020 in an effort to support prices. These production cuts have continued even as global demand for oil has rebounded. - Increased demand from China: China's economy has been recovering strongly from the COVID-19 pandemic, and this has led to increased demand for oil. China is the world's largest importer of oil, so its demand has a significant impact on global prices. - The war in Ukraine: The war in Ukraine has led to uncertainty and disruption in the global oil market. Russia is a major oil exporter, and Western sanctions on Russia have raised concerns about supply disruptions. - High inflation: High inflation has also contributed to the increase in oil prices. Inflation drives up the cost of producing and transporting oil, which is passed on to consumers in the form of higher prices. Do these factors cause a shift in demand or supply? The factors listed above have caused a shift in both demand and supply. The reduced production by OPEC+ has caused a decrease in supply, while the increased demand from China and the war in Ukraine have caused an increase in demand. Would this cause a shortage or a surplus of oil in the market?

The combination of a decrease in supply and an increase in demand is likely to lead to a shortage of oil in the market. This is already evident in the high oil prices that we are seeing today. How did the U.S. government intervene to stabilize the market in the short run? In March 2023, the U.S. government announced that it would release 1 million barrels of oil per day from the Strategic Petroleum Reserve (SPR) for the next six months. The SPR is a stockpile of oil that the U.S. government uses to stabilize the market in times of supply disruptions. The release of oil from the SPR is intended to help to lower oil prices and ease the pain at the pump for consumers. In addition to releasing oil from the SPR, the U.S. government has also been urging OPEC+ to increase production. However, OPEC+ has so far resisted these calls. It is important to note that the U.S. government's interventions in the oil market are likely to have only a limited impact on prices in the short run. The main factors driving high oil prices are the reduced production by OPEC+ and the increased demand from China. These factors are unlikely to change significantly in the coming months. Why did OPEC cut oil production? Key reasons explained | Reuters Donovan, K. (Ed.). (2023, April 3). Why did OPEC cut oil production? key reasons explained | Reuters . Reuters. https://www.reuters.com/business/energy/why-is-opec-cutting-oil-output- 2023-04-03/ (Donovan, 2023) US speeds up return of oil to Strategic Petroleum Reserve -Energy Dept | Reuters

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