In an article by John Ficenec, he discussed how with the recently lifted sanctions on trade with Iran has allowed the country to flood the oil market with a wave of a daily 500,000 barrels. These UN imposed sanctions were dissolved due to Iran cooperating with their obligations under the international nuclear deal. As a result of this excess in oil supply, stock market all across the Middle East have collapsed, which have seen oil shares indexes at lows not seen in 5-10 years. Oil prices dropped below $30 for the first time in 12 years, which has been a heavy blow to oil dependent economies around the world.
I found this article very interesting because of how it related directly to our class. Firstly, we briefly discussed the current trend of globalization and how important it is the economies around the world. This can be seen in the article because the event of sanctions being lifted in Iran has caused other Middle Eastern economies to collapse and oil prices in the United States to drop. Secondly, we have been learning about the supply and demand equilibrium sand how both supply and demand directly affect each other. The additional supply of oil from Iran caused a shift in the equilibrium and therefore caused the prices to drastically drop.
The article can be read at: https://uk.finance.yahoo.com/news/iran-sanctions-middle-east-stock-102835505.html
I think this article is very interesting as well. It is cool to observe that because oil prices drop (which is usually a good thing), it in turn makes other economies suffer. This is a great article that relates to our class like you said and I'm eager to continue to follow the price of gas/oil in the upcoming weeks. Hopefully things start to work themselves out!
ReplyDeleteI think this article is very interesting as well. It is cool to observe that because oil prices drop (which is usually a good thing), it in turn makes other economies suffer. This is a great article that relates to our class like you said and I'm eager to continue to follow the price of gas/oil in the upcoming weeks. Hopefully things start to work themselves out!
ReplyDeleteI am very interested to see how the current conflict between Iran and Saudi Arabia plays out. The US is in a very difficult position to be backing either side. If the US backed Iran, we might create conflict with Saudi Arabia who is one of our biggest trade partners. By supporting Saudi Arabia the US would be supporting the executions performed by the Saudis. As a result the Iranians could back out of the nuclear deal. However Saudi Arabia produces the second most oil in the world so they have a lot of power in the oil industry. While leaders of Saudi Arabia have claimed that the drop in prices of oil have been determined by market forces, the increase of supply which drops prices could be deliberate in order to hurt Iran. While I would like to think the changes in prices have been caused by natural forces, the oil industry is not a perfectly competitive industry and many players in the market have political conflict with one another.
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