Mostly summarized from Gregory Mankiw’s
Principles of Economics, 5th Ed.
PART 2 How Markets Work
Chapter 5 of 36 Elasticity and Its Application
Section 19 of 22
…
Some
of the most disruptive events of the world's economy have been in the world oil
market.
From 1973 to 1974 the
inflation-adjusted price of oil rose more than 50 percent.
Organization of Petroleum Exporting
Countries (OPEC) members colluded to raise the price of oil to increase their
incomes, accomplishing this by reducing the amount of oil they collectively
supplied.
A few years later OPEC restricted
supply to raise prices again and from 1979 to 1981 the price of oil doubled.
…
But OPEC could not maintain the high
price, mainly because cooperation among members broke down
· from 1982 to 1985 the price of oil fell
about 10 percent per year
· in 1986 the
price of oil fell another 45 percent
· by 1990 the inflation-adjusted price
of oil was back to the 1970 price, and stayed there through the 1990s
Since then rising oil prices have mostly been
caused by increasing world demand including from China.
…
The oil price swings of the 1970s and
1980s show how supply and demand behave differently in the short run and in the
long run.
In the short run, both supply and
demand for oil are relatively inelastic.
The oil supply was inelastic in the
short run mainly because these could not quickly change
· discovery of new oil resources
· non-OPEC oil supplying countries increase
oil supplies
· consumers shifting to smaller gas-efficient
cars
· development of new technologies reducing
quantity of oil products demanded
… …
discovery of new oil resources
aratana sekiyu shigen no hakken
新たな石油資源の発見
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