PDF HIGH DEMAND SUPPLY LOW SUPPLY DEMAND

[Pages:3]One basic economic principle is that of supply and demand, which helps explain why prices of goods and services rise and fall. Simply put, when many people want to buy a product that is in short supply, the price increases. If too much of a product is available with not enough people wanting to buy it, the price goes down.

HIGH DEMAND

HIGH SUPPLY

LOW SUPPLY

LOW DEMAND

Price increases

Price decreases

Oil, like other products, responds to supply and demand, so many of the oilproducing countries work together to help control the effects. OPEC, the Organization of Petroleum Exporting Countries, was established in 1960 to work to keep global oil prices fair and stable. They do this by adjusting their nations' oil production to help maintain a balance of supply and demand. OPEC representives meet at least twice yearly to make decisions about their production levels.

Give an example of the price of oil being influenced by the principle of supply and demand. Explain your example.

How do you think controlling levels of oil production could help countries in the Middle East whose economies depend on oil exports?

What condition do you think might cause OPEC nations to increase their production of oil? Why might they decrease it?

?InspirEd Educators, Inc. from "I Think: Geography ? Middle East"

1-866-WE-INSPIRE or 934-6774

Nations Producing More than One MILLION

Barrels of Oil per Day

Saudi Arabia

11.1

Russia

9.7

U.S.

8.3

Iran

4.1

Mexico

3.8

China

3.7

Canada

3.1

Norway

3.0

Venezuela

2.8

Iraq

2.0

U.K.

1.9

Libya

1.7

Brazil

1.6

Indonesia

1.1

Statistics in millions of barrels

per day from the

CIA Factbook, 2008

OPEC Member Nations

Average World Oil Prices from 1983-2005

?InspirEd Educators, Inc. from "I Think: Geography ? Middle East"

1-866-WE-INSPIRE or 934-6774

DIRECTIONS: Put yourself in the place of an OPEC representative to consider each situation. Tell what you think OPEC should or could have done in each circumstance and why. 1960's - Most OPEC countries were poor, trying to gain control of their oil exports from large, foreign-owned oil companies that controlled the markets.

1970's - Egypt and Syria went to war against Israel, and Iran underwent its Islamic Revolution. These and other regional conflicts made production difficult at a time when Americans in particular were guzzling gas.

1980's - Fear of dependency on foreign oil led the U.S. to open the Trans-Alaska Pipeline to allow for easier transport of oil within the U.S. America and other industrialized nations also began trying to conserve energy.

1990's - Iraq invaded Kuwait in 1990, which brought about the first Iraqi War. During that conflict, many Kuwaiti oil wells were set on fire and burned for months. The 90's also brought an American love affair with SUV's and major advances in petroleum technologies, offering many new uses for petroleum products.

2000's - Terrorism presents a major challenge in the 21st century, particularly in the oil-rich Middle East.

?InspirEd Educators, Inc. from "I Think: Geography ? Middle East"

1-866-WE-INSPIRE or 934-6774

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