SimpleEconomics:UnderstandingSupplyandDemand

　　TodayOPECpowerhouseSaudiaArabiasaidthattheyaregoingtocutdownonoilproductiontolevelouttheprices.Howmuchyouask?Try2millionbarrelsperday!Isthatgoingtoimpactthedownwardspiralingasprices?Absolutely

　　Here’sthebasicprinciple:themoreyouwantsomething,themoreyou’llpayforit,right?Imagineiftherewere1millionsuperbowlticketsavailableforsaleforthisyear’sgame.WouldthateffecthowmuchyouandIpaytoseethegameinperson?Definitely!ThenoveltyofactuallyattendingthesuperbowlwearsoffwhenEVERYBODYgetstodoit,right?Soinresponsewedon’tpayasmuchfortickets.DoyourememberwhenTickleMeElmowaspopular?Peoplewerepayinginsaneamountsofmoneyforthisparticularstuffedanimal!WhentheNintendoWiicameout,itwasthesamestory.

　　Whentherelessofanyproductorserviceavailable,wetendtopaymoreforit.Ifthereisplentyoutthereandthere’sreallynocompetitionorrushtopickuptheproduct,itusuallydoesn’tgoforasmuch.

　　Sowhatdoesthisallhavetodowithoil?

　　Sinceourmarketshavebeencrashingdownwards,theoveralldemandforgashasdropped.Whetheritbethatpeoplearen’tdrivingasmuchbecausetheydon’thaveajobtogoto,orthey’rejustbeingmorecarefulabouthowmuchthey’redrivingperiod,wecan’tsay.Butthefactremainsthattheworldisn’tbuyingasmuchgas.Asgasisbeingproduced,thereismoresupplythandemandandtheequilibriumisthrownoff;therefore,gaspricesarefalling.

　　Soinresponsetoallofthis,SaudiaArabiaisgoingtoproducelessinhopeofdroppingsupplytofallwheredemandlies;that,inturn,wouldhopefullyleveloutthepricing.

　　Inessence,wehaveamuchgreatersupplyofgasthantheworldneedsrightnow.Tohelpleveloutgasprices,theOPECisgoingtodowhateveritcan!

　　Canyoublamethem?Oilhasdroppednearly70%sinceitspeakinJuly!