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Major factor that affects the supply of oil

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You just ran across three interesting statistics: (1) the world's current supply of oil is estimated to be 1.3 trillion barrels; (2) the worldwide use of oil is thirty billion barrels a year; and (3) at this rate of consumption, we'll run out of oil in forty-three years. Overcoming an initial sense of impending catastrophe, you remember the discussion of supply and demand in this chapter and realize that things aren't as simple as they seem. After all, many factors affect both the supply of oil and the demand for products made from it, such as gasoline. These factors will influence when (and if) the world runs out of oil.

  1. What's the major factor that affects the supply of oil? (Hint: It's the same major factor affecting the demand for oil.)
  2. If producers find additional oil reserves, what will happen to the price of oil?
  3. If producers must extract oil from more-costly wells, what will happen to the price that you pay to fill up your gas tank?

Reference no: EM132024018

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