Chapter 2 Supply & Demand

Article: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/26/BUHH10S61B.DTL

Summary

The article I read is about how oil production is being overused. Since 2004, the oil prices have increased from $33 per barrel to $132. Production has increased by 1.8%, to 84.6 million barrels per day. These prices of oil will only continue to grow because the world population demands so much and it cannot keep up with our human desires. Due to the rising demand, oil companies would like to sell as much crude as they can. The Organization of the Petroleum Exporting Countries believes there is already enough oil in the market and states there is no need to pump more oil.

Connections

Connections from this article are supply and demand. As price increases, demand will decrease. If the price of a product raises, fewer people who want to buy it; therefore, the demand of the product will decrease. In the article above, the demand for oil was so high, the price had to increase because everyone needed it. When the supply of a product has a short amount, the price will increase because people would want to obtain the goods, but it would be difficult to obtain it since it is so limited. I believe the oil prices will only continue to increase, because we need oil for our daily lives. An example would be transportation. We need oil to help us get through our daily lives.

Reflections:

I believe that with the increase in oil, it will eventually cause people to stop demanding so much . In the future, if our demand for oil decreases, we are safe to say that the price will also decrease. The price will drop because there will not be a high desire and therefore the profit would not be as great. I believe the only way to reduce the price of demand is to find another alternative resource to depend on. We can then focus on the new resources and the demand and price of oil will decrease because no one will be interested in it anymore.