The <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />BBC reports that oil prices remain above the landmark $100 mark http://news.bbc.co.uk/1/hi/business/7169157.stm Their article says that “Prices rose as traders digested the fact that crude stockpiles were." /> tutor2u-logo

$100 oil prices and their macroeconomic effects

Sunday, January 06, 2008

by Geoff Riley

Oil prices remain above $100<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />BBC reports that oil prices remain above the landmark $100 mark http://news.bbc.co.uk/1/hi/business/7169157.stm

Their article says that

“Prices rose as traders digested the fact that crude stockpiles were at their lowest levels since January 2005. The weak US dollar has also increased demand for oil, which is priced in dollars, because it makes it relatively cheaper for holders of stronger currencies.”

“It's going to have a huge impact on overall global inflation," said Steve Rowles, a commodities strategist with CFC Seymour securities in <?xml:namespace prefix = u1 />Hong Kong”

Questions

(a) Using a supply and demand diagram illustrate the effects of the factors mentioned above on the market price of crude oil

(b) Outline three ways in which a rise in oil prices might lead to an increase in global inflation

Further reading on the $100 crude oil price

The Guardian:

The heavy price of $100 a barrel

http://www.guardian.co.uk/business/2008/jan/04/oil.creditcrunch

The Times

How $100 oil will change your life

http://business.timesonline.co.uk/tol/business/economics/article3137515.ece

The Economist

"The $100 barrel of oil is here to stay"

http://www.economist.com/displayStory.cfm?story_id=10436089&fsrc=RSS