Question

If the U.S. directed airstrikes against Iran, shutting down Iranian oil exports, how would this impact the following items and explain?

a) Would the world demand curve for crude oil: Shift to the right, shift to the left, or stay the same

b) World supply curve for crude oil: Shift to the right, shift to the left, or stay the same

c) U.S. demand curve for crude oil: Shift to the right, shift to the left, or stay the same

d) U.S. supply curve for crude oil: Shift to the right, shift to the left, or stay the same

e) World crude oil prices: rise, fall, change little

f) U.S. crude oil prices: rise, fall, change little

g) World oil consumption: rise, fall, change little

h) U.S. oil consumption; rise, fall, change little

i) U.S. oil imports; rise, fall, change little

Answer 1

Answer:

a) The world demand curve for crude oil will remain the same.

Explanation: With the shutting doen of the Iranian export, the total supply to world will differ and not the total demand. The demand will remain as it is.

b) The world supply curve for crude oil will shift to left.

Explanation: With shutting down the Iranain export of oil, the total supply of oil to world market will reduce. Hence there will be decline in supply of crude oil, therefore the supply curve will shift left.

c) The U.S. demand curve for crude oil will shift to right.

Explanation: As the export of crude oil from Iran is shut down by U.S., there will be shortage of oil in U.S. This will increase the demand of crude oil in U.S.

d) The U.S. supply curve of crude oil will stay the same.

Explanation: The supply side of U.S. crude oil will remain unaffected by shutting down the export of crude oil from Iran.

e) The world crude oil price will fall.

Explanation: With world demand for crude oil remaining unchanged and supply reducing the aggregate price will depend only on the quantity of oil supplied. As supply has reduced and supply has direct relation with the price hence the price will fall.