Chapter 2 blog

Article

Summary

This article talks about recessions usually bringing down prices, but the price of gas in the economy today is still rising. “[I]f oil costs this much now, when demand is low and supplies are high, what happens when the economy improves,” the author asks, “Another record-setting spike? Gasoline rising back above $4 a gallon?” Many oil traders are thinking the recession is at or near its worst, which means the economy will improve soon, maybe later this year. Because people are scared of the prices increasing, countries all over the world are signing a bill to regulate the use of oil. People can reduce the oil they use by walk, biking, or another alternative, instead of driving.

Connection

The prices are clearly rising due to an increase of supply and a decrease of demand. People are starting to find alternatives to driving because they are unwilling to pay for gas. If people are unwilling to pay for gas at this price, who would pay for gas when the economy recovers, when prices raise. The price of gas is generally inelastic because people have to buy gas, or not use an automobile at all; usually people who use gas don't stop just because of the price increasing, they might use less, but not completely stop using it. Because oil companies are increasing their prices, the prices of cars may drop because the two products are complementary.

Reflection

Because of the expensive prices for gas, I believe that people would walk more, or find another alternative to driving. If the prices keep rising, people would be forced to walk or use public transit for a while, until the prices drop to a reasonable level again. Also, if everybody stopped using gas, the oil companies would have no choice but to lower the prices; this would help the environment as well. I think the global bill of reducing oil use is a good idea because it would obviously help the environment, and help people save money.

Oil Scarcity

Article

Summary

This article reveals that as oil becomes more scarce, it
may lead to "electric vehicles and other technologies
such as high powered wind turbines." The "peak oil
theory" states that when an oil field reaches
approximately half full, it will become harder to extract
the oil and production will decline; therefore, electric
automobiles will be the most obvious solution. As
Neodymium and other rare earth materials are being
depleted, production of electric cars and wind turbines
are expected to increase. These rare earth metals exist
in a fixed quantity, and as we continue to use it, it will
obviously deplete and we will have to find an alternative.

Connection

This article is related to chapter 1 of Working with Economics - a Canadian framework because there are a few pages that teach us about scarcity. The dictionary definition of scarcity is "an insufficient amount or supply"; which is what this article clearly illustrates. The article states that the world's rare earth metals and oil are rapidly being depleted, and the result is the possibility of electric cars and wind turbines; as the amount of oil being extracted from the ground is declining, the consumer would have to pay more (opportunity cost increasing), and the price may raise until the consumer is unwilling to pay and must find an alternative.

Reflection

I believe that the oil companies are becoming more greedy and will continue to raise the price of gas. Also, we have no choice but to pay, until the price of electric/hybrid cars becomes cheaper and affordable for everyone. In my opinion, it all comes down to supply and demand - as the supply of oil depletes, there will be a higher demand for it, and the prices will increase dramatically, and when we're unable to afford it anymore, we will switch over to electric cars. Therefore, the success of electric cars is directly connected to the scarcity of oil.

economics 12

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