QUESTION 11 Article Summary For reasons including overproduction in the United States, a decrease in global demand, and limited production cuts by OPEC, the price of oil continued to fall during 2017. The falling prices have led OPEC to institute further cuts in oil production, but this effort has been thwarted by OPEC member Libya, whose production increased to 855,000 barrels a day, roughly triple its daily output from the previous year. Libya has Africa's largest oil reserves, but political unrest and militia blockades have severely restricted output in recent years. Due to political instability, OPEC had excluded Libya, Nigeria, and Iran from its agreement to cut production in 2016, but now all three countries have increased production. According to Michael Lynch, president of Strategic Energy and Economic Research, "A lot of experts figured things were so unstable in Libya and politics were so opaque that they did not want to factor in more supply from there. OPEC has been wounded. It gets back to the problem that OPEC has a lot of members in bad shape, making it difficult for them to call on everybody to make sacrifices equally. So they excluded those three and now it's come back to bite them." In late May, OPEC announced an extension to its cutback agreement, but in the month that followed, oil prices fell 16 percent. The same month, Libya announced plans to increase oil production to 1.5 million barrels a day by the end of 2018, and to 2.2 million barrels a day by 2023. Source: Clifford Krauss, "Libya's Increased Oil Production Thwarts OPEC's Reduction Plans," New York Times, June 20, 2017. Refer to the Article Summary. The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil. When the price of oil falls unexpectedly due to a supply shock, the equilibrium price level short run. O rises; rises O falls; rises O falls; falls O rises; falls and the unemployment rate in the
QUESTION 11 Article Summary For reasons including overproduction in the United States, a decrease in global demand, and limited production cuts by OPEC, the price of oil continued to fall during 2017. The falling prices have led OPEC to institute further cuts in oil production, but this effort has been thwarted by OPEC member Libya, whose production increased to 855,000 barrels a day, roughly triple its daily output from the previous year. Libya has Africa's largest oil reserves, but political unrest and militia blockades have severely restricted output in recent years. Due to political instability, OPEC had excluded Libya, Nigeria, and Iran from its agreement to cut production in 2016, but now all three countries have increased production. According to Michael Lynch, president of Strategic Energy and Economic Research, "A lot of experts figured things were so unstable in Libya and politics were so opaque that they did not want to factor in more supply from there. OPEC has been wounded. It gets back to the problem that OPEC has a lot of members in bad shape, making it difficult for them to call on everybody to make sacrifices equally. So they excluded those three and now it's come back to bite them." In late May, OPEC announced an extension to its cutback agreement, but in the month that followed, oil prices fell 16 percent. The same month, Libya announced plans to increase oil production to 1.5 million barrels a day by the end of 2018, and to 2.2 million barrels a day by 2023. Source: Clifford Krauss, "Libya's Increased Oil Production Thwarts OPEC's Reduction Plans," New York Times, June 20, 2017. Refer to the Article Summary. The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil. When the price of oil falls unexpectedly due to a supply shock, the equilibrium price level short run. O rises; rises O falls; rises O falls; falls O rises; falls and the unemployment rate in the
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Economics
QUESTION 11
Article Summary
For reasons including overproduction in the United States, a decrease in global demand, and limited production cuts by OPEC, the price
of oil continued to fall during 2017. The falling prices have led OPEC to institute further cuts in oil production, but this effort has been
thwarted by OPEC member Libya, whose production increased to 855,000 barrels a day, roughly triple its daily output from the previous
year. Libya has Africa's largest oil reserves, but political unrest and militia blockades have severely restricted output in recent years. Due
to political instability, OPEC had excluded Libya, Nigeria, and Iran from its agreement to cut production in 2016, but now all three
countries have increased production. According to Michael Lynch, president of Strategic Energy and Economic Research, "A lot of experts
figured things were so unstable in Libya and politics were so opaque that they did not want to factor in more supply from there. OPEC
has been wounded. It gets back to the problem that OPEC has a lot of members in bad shape, making it difficult for them to call on
everybody to make sacrifices equally. So they excluded those three and now it's come back to bite them." In late May, OPEC announced
an extension to its cutback agreement, but in the month that followed, oil prices fell 16 percent. The same month, Libya announced
plans to increase oil production to 1.5 million barrels a day by the end of 2018, and to 2.2 million barrels a day by 2023.
Source: Clifford Krauss, "Libya's Increased Oil Production Thwarts OPEC's Reduction Plans," New York Times, June 20, 2017.
Refer to the Article Summary. The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of
oil. When the price of oil falls unexpectedly due to a supply shock, the equilibrium price level
short run.
and the unemployment rate
in the
O rises; rises
O falls; rises
O falls; falls
O rises; falls
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