Response to Articles Course 2022

RESPONSE TO ARTICLES 1
Response to Articles
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RESPONSE TO ARTICLES
2
Oil has become a global product that is traded internationally among different players.
Oil prices are partially dictated by the forces of demand and supply and also by the speculations
regarding balance. The current oil prices are determined by the balance between the demand and
supply based on projections by the traders and spectators’ guesses. The expectations by the
speculators have, in most cases fallen for exaggerations, thus inviting immediate corrections that
lead to market volatility. For instance, in 2008, the oil prices per barrel retailed as high as $147
and as low as $47 (Davies, 2018).
Question 1
A deliberate output restriction will lead to substantial shocks in oil prices, and this is
exacerbated by sudden supply cuts being added to the global demand. A decrease in the output of
oil will trigger a rise in the price of oil as it is deemed scarce (Lyndon & Donev, 2018). Thus,
OPEC cartels may restrict the production, and the immediate effect is the rise in the price of the
oil.

RESPONSE TO ARTICLES
3
Question 2
A cartel refers to an organization developed through a formal consensus between
producers of a product or service to have control of supply and manipulate the prices. In a
nutshell, a cartel can be defined as an amalgamation of enterprises or countries that have
collective bargaining power, as a single producer and regulate the prices for the products and
services they produce with minimal or no competition. OPEC comprised of 13 nations that are