Why are oil prices so high? What is going to happen to them in the future?
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Three questions
1. What do economists tell us about why oil prices are what they are and what is going to happen to them in the future?
2. How did they reach these conclusions? what theories and concepts do they consider to be most relevant?
3. Do you find their analysis convincing? why or why not?
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Solution Summary
This solution discusses economic theories behind the market for oil in 319 words.
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1. Economist mention a number of reasons for the price of oil including the OPEC Cartel which sets quotas for its members, threats to the supply (wars in the Middle East, conflicts with Chavez in Venezuela), speculation in the market and finally, the relatively inelastic nature of oil. People have to buy it to power their cars and most people do not change their consumption significantly. In the future, economist predict that as oil reserves are depleted the price of oil ...
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