In an attempt to lower the price of oil the US is leading an international effort of other major economies to release oil reserves.
The price of crude oil reached a 7-year high of $81.93 per barrel in October as supply has struggled to keep up with the surging demand. The addition of oil reserves to the market from the US and other big oil consumers such as China, India, Japan, South Korea, and the UK is expected to plug the shortage and put downward pressure on prices.
Crude oil prices have been soaring upwards in the last year as a result of countries loosening their Covid-19 restrictions. As global demand recovers from the pandemic, the demand for oil has increased significantly and oil producers, largely controlled by OPEC, have been unwilling to increase supply at a quick enough rate.
This has pushed up the price of petrol and energy around the world, with governments now stepping in to protect consumers from struggling to pay their energy bills.
Source: Trading Economics
THINK LIKE AN ECONOMIST!
1. Using the data above, explain why the price of crude oil has increased so significantly in the last year.
Q2. Draw a diagram to show the impact of releasing oil reserves on the equilibrium price and quantity in the market for oil.
Q3. Who are OPEC and why are they reluctant to increase the production of oil?
Q4. Evaluate the effectiveness of this government intervention in dealing with the problem of soaring energy bills and petrol prices.
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