International Baccalaureate Program
Economics Commentary 1
In this assignment I will investigate an article from the point of view of an economist. Furthermore I will explain the linkages between concepts and theories of microeconomics and the article. Purpose of this commentary is to present my economic insight into the implications of the article. Basic economic concepts such as demand, supply and surplus can be applied to markets to help understand and solve problems in the economy. These economic models inform you about market situations, so you can make the right decisions in order to be successful. Demand for a good is the quantity of goods or services that will be bought over a period of time at any given price. Supply is the quantity of goods sellers are prepared to sell at any given price over a period of time. Surplus exists when the quantity supplied exceeds the quantity demanded. Producers supply more products than demanded by the consumers. (Source: Economics Fith Edition, Alain Anderton, Causeway Press)
The article is about recent events in the oil market in the UK. It informs you about the weak gas exports to Europe and the decrease in demand for gas. British spot prices decreased because the gas transmission network was oversupplied. That can be illustrated by the graph below.
Offshore oilrigs produced more than usual while other oil fields continued supplying the same quantity as before so that leads to an oversupply. People have more gas than they need, which means that the value of gas drops. But traders still need to sell their gas because it would be inefficient. The solution is to make more people buy gas, which means an increase in demand. You can increase demand by lowering the price. To bring the market to balance again operators are pumping surplus gas into storages to prevent further decrease in price. By injecting gas into
storages you decrease the quantity of gas...
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