We have seen an unprecedented increase in oil prices which has affected not only the U.S. economy but other economies as well. Aplia’s economics blog recently contained a story describing how the market for oil takes into account expectations of the future. A recent post on the Freakonomics blog discusses the price of oil relative to the price of water. Both of these blogs should help you understand how the markets for oil work the way that they do.
In 2004, Ben Bernanke made a speech remarking the importance of oil in our economy, and how uncertainty plays such an important role in the price of oil. He discusses not only the current supply and demand for oil but also makes future predictions about the market. In 2008, Bernanke spoke again on oil, when prices for a barrel of oil were much higher than they are today. Many politicians have discussed plans to lower our dependence on oil in response to the higher prices of oil today. Although our economy has suffered due to high oil prices, other countries have been really successful in the oil industry such as Russia.
Questions you might try to answer:
• Given what has happened to oil prices over the past month, what do you believe will happen to economies that are dependent on revenues from oil?
• Do you believe speculation has played a major role in the price of oil and gasoline over the past year?
• What impact do you believe uncertainty in oil markets will have on our overall economy?
• Why do you believe oil prices have recently fallen so dramatically? Please explain.
I would like your statements to be as subjective as possible, or in jargon terms, positive and not normative in nature. Also, remember, I want you to keep your descriptions short, basic, and related to classroom content. Read other students comments before posting, and please leave your name with your posting.