RVHS_H2_ECONS_P1_QP

This document consists of 7 printed pages and 1 blank page. [Turn over 1 ECONOMICS 9757/01 Paper 1 Case Study 12 September 2017 2 hours 15 minutes Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your index number and name on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. Start each case study on a new sheet of paper. At the end of the examination, fasten your work securely together. Your answers for each case study are to be handed in separately. The number of marks is given in brackets [ ] at the end of each question or part question. RIVER VALLEY HIGH SCHOOL YEAR 6 Preliminary Examination II in preparation for General Certificate of Education Advanced Level Higher 2

2 © RVHS 2017 9757/01 [Turn over Answer all questions. Question 1: The market for oil and electric cars Table 1: Oil production and consumption (millions of barrels) Region Consumption Production 2014 2015 2014 2015 North America 23421 23753 18833 19733 South & Central America 7171 7139 7659 7761 Europe & Eurasia 18287 18450 17206 17479 Middle East 9180 9300 28515 30065 Asia Pacific 31195 32494 8307 8369 Total 89254 91136 80520 83407 Source: BP Statistical Review of World Energy Extract 1: Are low oil prices here to stay? Despite a recent upturn, the price of oil has slump ed almost 50% since last summer following the longest-running decline for 20 years. US oil, and to a lesser extent Libyan oil returning to the market, has pushed up supply while a slowdown in the Chinese and EU economies have led to a poor outlook for the economy, causing oil prices to fall sharply. This is precisely when the Organization of Petroleum Exporting Countries (OPEC), the cartel of major global oil producers, would normally step in to stabilise prices by cutting production. It has done so many times in the past, so often in fact that the market expects OPEC to intervene. This time it hasn't. In a historic move at the end of last year, OPEC said not only that it would not cut production from its 30 million barrels a da y quota, but had no intention of doing so even if oil fell to US$20 a barrel. And this was no empty threat. Despite opposition from Venezuela, OPEC leader Saudi Arabia refused to bail out its more vulnerable members. Many OPEC members need an oil price of US$100 or mo re to balance their budgets, but with an estimated US$900bn in government reserves, Saudi Arabia can afford to play the waiting game. OPEC now supplies a little over 30% of the world's oil, down from almost 50% in the 1970s, partly due to US oil producers flooding the market. "Given this scenario, who should be expected to cut