Energy Economic Study Questions 2 Research Paper

Energy Economic Study Questions 2 - Research Paper Example If there is excess demand and low supply prices increase. ‘Cheating’ by OPEC members refers to a situation where members do not comply with quotas set by OPEC. It involves member countries producing more than the quantity required by OPEC. Some members such as Nigeria produce more than the set quantity because of their economic status. Cheating by member countries affects the supply of oil hence affecting prices set by OPEC. World oil situation refers to the current quantity of oil available and the prevailing prices. Improved world oil situation refers to a situation where oil producing countries produce oil in sufficient quantities to meet demand. The availability of oil and in standard prices is considered the normal situation. OPEC have the power to influence the world oil situation by producing more or little oil. Energy efficiency has contributed to improved world oil situation by reducing over reliance on oil e.g. use of electric trains. This causes people to slowly shift from the use of no renewable oil to use of electricity hence reducing the strain on oil resources. New technologies for finding and extraction of oil have contributed to increased oil situation. This has made it easier to discover more oil wells. More oil wells will lead to increased supply hence improving the world oil situation. Also, better understanding of the local geology is a contributing factor. Jaccard uses economic concepts such as consumer response to prices, greater use of coal and near perfect substitution in his argument that depletion of conventional oil resources is unlikely to be cataclysmic. When price of a good increase, there is slow response initially, and this keeps the price constant for a while. This slow response is equivalent to fall in demand for the product. This is because people look for other alternatives. In the case of oil, money might flow from gas and oil to other alternatives. Jaccard believes that with oil, coal is an alternative.