The Electoral College

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Running Head: DEMAND AND SUPPLY 1

DEMAND AND SUPPLY 4

 

Applying Supply and Demand:  Real World Examples

Student’s name

Panther ID

Institution

May, 2019

The article I chose to explain the demand and supply situation is how the world’s oil producers will face surplus during the year 2019 because of the slowness of demand growth.

During the year 2019, the global supply of oil is expected to exceed its demand. Consequently, the surplus supply will be evidenced because of the rise in the supply of oil in comparison with the consumption. The international energy agency’s report predicted a change in demand for oil from October 2018. According to (CNBC, 2018), there was a rise in production per day of 1.3 million barrels to 1.4 million barrels. Supply around the world has increased from the middle of 2018 due to the increase in production from OPEC countries and also from non-OPEC countries, this has lead to supply exceeding the demand growth thus leading to a surplus. According to (CNBC, 2018), an oversupply of oil has led to a decrease in the price of oil. Thus, Organization of Petroleum Exporting Countries (OPEC) are planning a meeting with their partners to discuss a proposal to reduce oil supply per day with 1.4 million barrels, in order to prevent the surplus weakening the prices of oil. Since October the oil products’ prices have fallen by more than 25%, it has been the lowest price in eight months period. The international energy agency forecasted the rise of oil production separate from the OPEC by 2.4 million barrels per day in 2018 and 1.9 million barrels this year unlike it earlier estimates per day of 2.2 million barrels in 2018 and 1.8 million barrels this year. The U.S oil supply will rise per day by 2.1 million barrels in 2018 and 1.3 million barrels in 2019. This increase in the oil supply will exceed the demand growth all over the world which will cause an increase in surplus of oil 2018 and 2019, this will impact to a reduction in prices of oil products in order to consume all the oil supplied. This will be shown by the shift in the supply curve of oil.

Price$

New Supply of oil

Demand of oil

supply of oil

price

surplus

Quantity (barrels per day)

Q1

Q2

Reference

CNBC. (2018). Global oil market faces surplus throughout 2019 as demand growth slows: CNBC. Retrieved from https://www.cnbc.com/2018/11/14/global-oil-market-faces-surplus-throughout-2019-as-demand-growth-slows.html