Chapter 2: Supply and Demand

Article Link:

http://www.tradingtoday.com/26-oil-supply-demand

Summary:

The article states that the demand of crude oil will continue to exceed even though with its high prices. This is occurring because countries with major economic powers, like China and India are using the world’s supply of oil at an incredible rate. According to supply and demand, if the quantity demand for oil is too great, then suppliers would not be able to keep up. As a result, supply will gradually decrease because suppliers cannot produce enough to meet the demand. Because oil is becoming scarce, in many countries the oil production will reduce as the year goes on. In the 2008 report, reports say that the Cantarell fields in Mexico will only generate 1 million barrel a day. In Canada, we have fields that hold 1.7 trillion barrels of oil. But, the process of extraction is far too expensive for producers to continue digging oil up. To summarize, the article is trying to persuade us to turn our heads to alternative sources for oil.

Connection:

I think the main connection between this article and Chapter 2 is the theory of Supply and Demand. In class, I learned that the factors that affect demand are price of substitute, population and income. For instances, electricity is a substitute for oil, however, the price for it is high, as well, the life span of it isn’t as great. The population in China and India is in the billions and that is why the consumption rates in that part of the world is so exceeding. In addition to income, China is a country with strong economic power; hence, they’re capable of spending more money and resources in industrializing, which means that their demand for fuel is overpowering the other countries of the world.

Reflection:

It’s evident in the economy today that the oil prices have increase compared to previous years. However, the demand for crude oil right now has decreased because of the weak economy. Couple months ago, oil was $1.15/litre, but now; it dropped to $0.95/ litre. I say the oil prices will stay under $1.00/litre because drivers are buying less oil. Moreover, I think the production cost for extracting oil is too much, and producers should reduce the cost too balance out all the expenses. Maybe then, affording oil wouldn’t be such a hassle.

Chapter 1: Scarce Resource and Opportunity Costs

This article:

http://www.canada.com/topics/news/story.html?id=67771e46-d27c-4872-9224-efda9e086dfe

Summary:

This article mainly states that our demands for oil are far too high compared to the amount we can actually produce. Since, the supply is low, then the demand for it will be high because people are eager to get it. Evidently, the oil gas has increased dramatically over the pass five years. Moreover, outlooks suggest that our oil prices will continue to grow steadily over the next half a decade. Research show that the amount of oil we demand is in the near thirty billion gallons, while the production rate is only at eight billion. This show that our usage rate of oil isn't steady due to the fact that we are suddenly consuming more. In addition, reviews show that oil production will hardly grow anymore and that if we continue to consume million barrels a day, we might just enter the "Age of Scarcity."

Connections:

The connection between this article and Chapter 1 revolves around the word scarcity. The term scarcity means insufficient amount or shortage of supply to a demand. Because, nowadays, vehicles are the main way of transportation, and industrialization needs fuel, so oil usage will be high. Unfortunately, oil is a limited resource, and so if we continue to consume as much as millions of barrels a day, the world might one day run out of this supply. This wouldn't be a problem if oil can regenerate itself, or the cost for extraction wouldn't be as expensive but according to this article, the production of oil will hardly grow anymore. This means that once it's gone, it's gone.

Reflections:

The "Age of Scarcity" does not sound too appealing. I think the only way we can move away from this is to stop or slow down our consumption rate. Using almost four times the amount of oil that we can produce is way out of hand. I think the best way to steady our oil usage, is to not use it for awhile. Instead, we should come up with an alternative source beyond hybrids or solar energy. Personally, I believe that instead of putting money into war, people should develop better alternative energy. If no technological breakthroughs come along, then in the near future, the Age of Scarcity sure will.