Summary: “Even as the cost of crude oil has soared in recent years, the amout pumped from the ground hasn’t” During the Financial Tsunami, the price of oil isn’t decreasing but increasing. The economy should not work in that way. The imbalance between supply and demand keeps pushing prices higher. “When a product is in short supply, the price rises, and the companies that make it usually produce more so they can cash in. Supply eventually outstrips demand and the price goes down..” The oil companies have to find more oil fields, but it is more and more difficult.
Connection: In chapter 2, demand and supply are very important to the market. They can control people’s desire to consume. The article provide a good example. Normally, when the supply decrease, the price increase for sure, then the companies will try their best to produce more to earn money. Once the supply outstrips demand, the price of the product goes down. Changes in demand also is effective in this case. Since the demand goes down, less people are going to buy the product. Of course the price goes down. There are a lot of elements to affact the market.
Reflection: This is very confusing. During the Finalcial Tsunami, the demand of oil suppose to decrease. But it really didn’t. Also it is very difficult to find big, untapped oil fields, which people often called “elephants”. When the oil companies can’t keep their output level of oil, the supply decreases and stays in a low level. This is why the price of oil seems never goes down. I heard someone said that the oil in the Earth is running out, and until 2025 there is no more oil to pump. This is scary because when we don’t have gasoline, how can we drive cars?
Article: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/26/BUHH10S61B.DTL
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