This article helped be to gain a more complete understanding of an issue that affects each one of us. The main misconception that I had was that if oil supply was too high, the major suppliers would simply cut back in order to keep prices at a healthy level. There is certainly some scaling back going on, but the world’s largest oil cartel, OPEC, decided toward the end of 2014 that they were unwilling to risk their market share to raise prices. Saudi Arabia, the world’s second largest supplier, took a similar stance. So, supply continued to exceed demand and prices fell to the lowest we have seen in years.
The most interesting lesson that I learned from this article is that even the largest oil suppliers in the world cannot control the market perfectly. With everything that we know about growth trends and demand and demand around the world, there is still much uncertainty involving this industry. The textbook describes the influences that market forces have on the supply/demand curves. In theory, it seems quite simple to forecast changes in these curves and make adjustments to reach market equilibrium. However, we are witnessing a real life example of how difficult it can be to reach such equilibrium.