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Article Summary For Reasons Including Overproduction in the United States, a Decrease

question 276

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Article Summary
For reasons including overproduction in the United States, a decrease in global demand, and limited production cuts by OPEC, the price of oil continued to fall during 2017. The falling prices have led OPEC to institute further cuts in oil production, but this effort has been thwarted by OPEC member Libya, whose production increased to 855,000 barrels a day, roughly triple its daily output from the previous year. Libya has Africa's largest oil reserves, but political unrest and militia blockades have severely restricted output in recent years. Due to political instability, OPEC had excluded Libya, Nigeria, and Iran from its agreement to cut production in 2016, but now all three countries have increased production. According to Michael Lynch, president of Strategic Energy and Economic Research, "A lot of experts figured things were so unstable in Libya and politics were so opaque that they did not want to factor in more supply from there. OPEC has been wounded. It gets back to the problem that OPEC has a lot of members in bad shape, making it difficult for them to call on everybody to make sacrifices equally. So they excluded those three and now it's come back to bite them." In late May, OPEC announced an extension to its cutback agreement, but in the month that followed, oil prices fell 16 percent. The same month, Libya announced plans to increase oil production to 1.5 million barrels a day by the end of 2018, and to 2.2 million barrels a day by 2023.

-Refer to the Article Summary. The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil. After an unexpected decrease in the price of oil, the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

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Understand the basic concepts of fixed, variable, and total costs in economic decision-making.

Distinguish between sunk costs and relevant costs for decision-making.

Apply the concept of opportunity cost accurately in various scenarios.

Definitions:

Green Marketing

Marketing efforts focused on promoting products and practices that are environmentally friendly.

Triple-Top Line Marketing

A marketing strategy that focuses on social, environmental, and financial success simultaneously.

Preemptive Compliance

Actions taken in advance to comply with potential regulations or guidelines to mitigate risk or to gain a competitive advantage.

Demarketing

A strategy used to reduce demand for a product either temporarily or permanently, often due to supply constraints or strategic decisions.