Wednesday, September 2, 2009

Seems like we were just talking about this...

From Bloomberg: BP makes 'Giant' Oil Discovery in Gulf of Mexico.

Predicted effect on the price of oil? (feel free to make some assumptions about other factors)

Effect on the conservation push?

hat tip: Tim Haab at env-econ

1 comment:

Anonymous said...

According to our basic economic principles, a large new oil discovery will shift the supply curve right. This will decrease the equilibrium market price and increase equilibrium quantity demanded (assuming ceteris paribus) This may act as a major setback for the push for alternative energies as oil is a more readily available and cheaper substitute. Oil has an even brighter future now since this major discovery is located in the Gulf of Mexico and not in the middle east, allowing the US to become less reliant on foreign oil. According to the article, BP will be able to increase output per day in the region by 50% by 2020. Unless the government intervenes with a heavier tax, similar to governments in Europe, it looks as though oil will remain a cheap commodity for many years to come, putting a major halt on the conservation push. –Andrew S.