NYJC_H1_ECONS_Q2_suggested_answer

Are low oil prices here to stay? Extract 4: Predicting the oil price is challenging What we do know is that, despite a recent upturn, the price of oil has slumped almost 50% since last summer following the longest-running decline for 20 years. And we know why - US shale oil, and to a lesser extent Libyan oil returning to the market, has pushed up supply together with a slowdown in the Chinese and EU economies. With the booming US shale industry showing little signs of slowing, and growing concerns about the strength of the global economy, there are good reasons to suspect that the current slump in the oil price will continue for some time. Source: BBC News, 24 February 2015 Figure 2: Latest Price for Crude Oil Source: Nasdaq.com Jan 14 th 2015

Figure 3: The value of oil exports based on different oil prices per barrel for selected countries Source: Energy Matters, 18 Nov 2015 Extract 5: What are the effects of fracking on the environment? The oil and gas industry has been expanding consistently for decades due, in part, to the advances in technology in the processes of extracting, transporting and delivering the resource to consumers. One of the most-discussed technological advances is hydraulic fracturing, also known as fracking. This extraction process combines often dangerous chemicals with large amounts of water and sand at high rates of pressure into rock formations to fracture surrounding material for the purpose of extracting oil and gas. Fracking is controversial because of the amount of natural resources needed to complete its process, and more notably because of the negative effects like air pollution and water contamination. In addition to air and water pollution, fracking also increases the potential for oil spills, which can harm the soil and surrounding vegetation. Fracking may cause earthquakes due to the high pressure used to extract oil and gas from rock and the storage of excess wastewater on site. Source : Investopedia, 19 January 2015 Extract 6: Can Indonesia phase out energy subsidies without hurting the poor? Indonesia enacted a major reform recently. On 1 January, President Joko Widodo followed through with his electoral promise to cut decades-long subsidies for energy products. Many leaders had tried before him, but retreated in the face of fierce resistance from the people. Thanks in part to low oil prices, the newly-elected President got the reform through without much trouble. The true challenge will be how to support poor households when prices start rising again. Source : OECD Insight 28 April 2015 0 50 100 150 200 250 300 350 Saudi Arabia UAE Kuwait Qatar $US 2014 billions 2013 base period Value of Oil Exports $110/barrel $50/barrel

Extract 7: Little cheer for Singapore’s economy despite lower oil prices Singapore: Lower global oil prices should stimulate global economic growth, according to the International Monetary Fund, which estimates th