Oil company cutbacks may raise gas prices down the road By slashing new investment and production, the oil industry is sowing the seeds for a sharp rise in the price of gasa once demand picks up as the economy recovers from the recession. After hitting $147 in July, 2008, crude oil prices have dropped by 70 percent. Dozens of projects, including oil fields from West Texas to Russia and oil-sands projec in Canada, have been put off. Many traditional oil fields can be profitable with crude oil at $30 to $40 a barrel, but unconventional drilling is more expensive. New oil-sands projects in Canada, for example, require oil prices of about $80 a barrel. Source USA Today, March 3, 20 How does a fall in the price of crude oil change the supply of oil? If the price rises back to $80 a barrel, how will investment and production of oil change? The 70 percent fall in the price of crude oil of oil OA. decreases the quantity of oil supplied; decrease OB. decreases the supply of oil in the short run; increase OC. decreases the quantity of oil supplied; increase If the price rises back to $80 a barrel, investment and production OD. does not have any effect on the market for oil because the stock of oil never changes, increase OE. decreases the supply of oil in the short run; decrease
Oil company cutbacks may raise gas prices down the road By slashing new investment and production, the oil industry is sowing the seeds for a sharp rise in the price of gasa once demand picks up as the economy recovers from the recession. After hitting $147 in July, 2008, crude oil prices have dropped by 70 percent. Dozens of projects, including oil fields from West Texas to Russia and oil-sands projec in Canada, have been put off. Many traditional oil fields can be profitable with crude oil at $30 to $40 a barrel, but unconventional drilling is more expensive. New oil-sands projects in Canada, for example, require oil prices of about $80 a barrel. Source USA Today, March 3, 20 How does a fall in the price of crude oil change the supply of oil? If the price rises back to $80 a barrel, how will investment and production of oil change? The 70 percent fall in the price of crude oil of oil OA. decreases the quantity of oil supplied; decrease OB. decreases the supply of oil in the short run; increase OC. decreases the quantity of oil supplied; increase If the price rises back to $80 a barrel, investment and production OD. does not have any effect on the market for oil because the stock of oil never changes, increase OE. decreases the supply of oil in the short run; decrease
Chapter1: Making Economics Decisions
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Transcribed Image Text:Oil company cutbacks may raise gas prices down the road
By slashing new investment and production, the oil industry is sowing the seeds for a sharp rise in the price of gasoline
once demand picks up as the economy recovers from the recession. After hitting $147 in July, 2008, crude oil prices
have dropped by 70 percent. Dozens of projects, including oil fields from West Texas to Russia and oil-sands projects
in Canada, have been put off. Many traditional oil fields can be profitable with crude oil at $30 to $40 a barrel, but
unconventional drilling is more expensive. New oil-sands projects in Canada, for example, require oil prices of
about $80 a barrel.
Source USA Today, March 3, 2009
How does a fall in the price of crude oil change the supply of oil? If the price rises back to $80 a barrel, how will
investment and production of oil change?
The 70 percent fall in the price of crude oil
of oil
Search
OA. decreases the quantity of oil supplied;
decrease
OB. decreases the supply of oil in the short run;
crease
OC. decreases the quantity of oil supplied;
increase
If the price rises back to $80 a barrel, investment and production
OD. does not have any effect on the market for oil because the stock of oil never changes,
increase
OE. decreases the supply of oil in the short run;
decrease
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