(1) Using supply-and-demand graphs, graph and explain what would happen to the price of oil if the US stops drilling on federal lands.
This event will lead to supply shock of oil. Supply will shift to left. price levels will go up and quantity also goes down.
As shown in the figure below, supply shifts from s1 to s2, quantity goes down from Q1 to Q2 and prices go up from P1 to P2.New equilibrium is set at point B from initial of point A.
2. Long run impact would be different and will not be as severe as imports can bee made of oil to meet demand-supply mismatch. Alternative oil wells can be explored in the long run or electric vehicles can be produced on large scale with technology improvements. Hence substitutes and technology might change the severity of problem in the long run.
Several Democratic Presidential candidates have promised to ban oil drilling on federal lands and waters. (1)...
Oil prices rose more than 20% this year but there were no sharp spikes and crude futures barely sniffed $70 a barrel despite attacks on the world’s biggest oil producer, sanctions that crippled crude exports of two OPEC members and gigantic supply cuts from big oil producing countries. The price gains in crude oil benchmarks were all in the first quarter of 2019, even as the next several months featured supply shocks that in the past would probably have propelled...
Oil prices rose more than 20% this year but there were no sharp spikes and crude futures barely sniffed $70 a barrel despite attacks on the world’s biggest oil producer, sanctions that crippled crude exports of two OPEC members and gigantic supply cuts from big oil producing countries. The price gains in crude oil benchmarks were all in the first quarter of 2019, even as the next several months featured supply shocks that in the past would probably have propelled...
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