Running head: The End of Elastic Oil Article Summary

The End of Elastic Oil Article Summary Student Name Principles of Macroeconomics/ECO !" Date Instructor Name

The End of Elastic Oil Article Summary The End of Elastic Oil Article Summary

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#n this paper the article$ The End of Elastic Oil %y Tom &onrad is summari'ed (hile e)plaining ho( changes occur in supply$ demand$ and price* Scarcity$ marginal costs and %enefits$ %eha+ioral economic models$ and %usiness cycles help e)plain the ad,usting prices of oil* They e+en help to identify (ays the consumers may affect the economy in a more positi+e manner* Tom &onrad descri%es price elasticity in oil o+er the past 1- years and ho( it affects the economy in the .or%es article$ The End of Elastic Oil* #n the article &onrad e)plains that changes in demand for oil plays a much larger role in pricing than it once had* The article continues on to e)plain the pro%lem (ith ad,usting oil consumption in the /nited States and (ays to %etter utili'e resource to ha+e %etter control on the price of oil as a consumer* 0o(e+er$ the largest e)porting nations limit the oil supply there%y hindering the a%ility to ma1e ad,ustments* 2ecause these nations ha+e the ma,ority of the oil used in the (orld they can dictate ho( much oil is sold to maintain the %udgets they set* Scarcity accounts for the control these nations ha+e o+er the supply of oil* Scarcity refers to the (ants of the consumer and the mar1ets a%ility to fulfill those (ants 3Colander$ "-1-4* &onrad goes on to state the difficulties of o%taining oil in the /nited States and ho( the e)cessi+e cost is currently difficult to out(eigh %ut is %ecoming more attracti+e* Essentially the marginal %enefit of o%taining oil (ithin the /nited States is greater than the marginal cost5 meaning that using oil from the /nited States instead of imported oil has a much %etter cost %enefit than it once did* The data the &onrad supplies sho(s that demand has little affect on price for oil o+er the past 1- years$ (hich indicates the consumer is at the mercy of the supplier in the current situation* 0e used pricing models %ased on supply and demand o+er a three6year period to sho( the correlation* 0o(e+er$ the data does suggest this trend is passing and the demand is %eginning to ha+e an impact on price* &onrad7s study sho(s that consumers are %eginning to

The End of Elastic Oil Article Summary change ha%its$ mo+e closer to (or1$ and %uy more efficient +ehicles to offset the e)cessi+e fuel costs* This in turn has %egun to affect the price of fuel much more in years past* &onrad uses specific %eha+ioral economic models that sho( ho( people can and do create change as a consumer* 0e suggests that people are %ecoming more a(are of the cost of oil* 8ot only the financial cost %ut also the en+ironmental as (ell* #n his model &onrad sho(s that society has a stronger impact on mar1et than it once had* 9ith more communication society %ecomes more fluid and a collecti+e enlightened self6interest %ecomes more e+ident* &onrad e)plains that consumers can ta1e action to help in maintaining %alance to the mar1et and pricing of oil %y ad,usting demand* 0e e)plains some simple (ays to do this are increasing alternati+e transportation in+estments$ impro+ing the rail system$ increased gas ta)$ pay as you dri+e roads$ and encouraging electric transport* 2y changing the consumer ha%its and ad,usting to e)u%erant cost the consumer can affect price in a larger scale* The tric1 is to rally the consumers in a manner that has the most impact on demand* #n summary the article has some strong points on ho( oil prices ha+e long %een set %y the suppliers %ecause of the scarcity and difficulty of o%taining the product* 0o(e+er (ith time changes to consumption and attitude of the consumer has %ecome increasingly effecti+e in changing price* The consumer still does not ha+e the po(er to ad,ust price (ith demand$ %ut %y implementing only a fe( plans %uilt %y %eha+ioral economic models this too may change* Simply changing societal attitudes to(ard oil consumption and placing alternati+e products in the mar1et (ill help create a competiti+e en+ironment that (ill ad,ust pricing to the appropriate le+el*

References

The End of Elastic Oil Article Summary Colander$ ;* C* 3"-1-4* Macroeconomics 3<th ed*4* 2oston$ MA: Mc=ra(60ill/#r(in* &onrad$ T* 3"-1"4* The End of Elastic Oil* Retrie+ed on >uly "<$ "-1" from http://(((*for%es*com/sites/tom1onrad/"-1"/-1/"?/the6end6of6elastic6oil/*