Answer to Question #291990 in Microeconomics for Erick

Question

How can rising oil prices in recent years be explained?

Answer 1

Oil prices are likely to have risen as a result of both increased demand and fears of supply interruptions. Oil consumption has been rising globally, exceeding any increases in production and spare capacity. One of the main reasons is that developing countries, particularly China and India, have been quickly expanding. These economies are becoming increasingly industrialized and urbanized, leading to a rise in global oil demand. Furthermore, tensions in oil-producing nations such as Nigeria, Venezuela, Iraq, and Iran have fueled fears of supply interruptions in recent years.