Impact of recession and oil price increase

In summary, the conversation discusses the potential impact on the supply curve in the event of a recession and an increase in oil prices. The changes in the supply curve are determined by the cost of production, including opportunity cost. In the short run, the supply curve may not shift due to decreased demand, but in the long run, a significant recession can affect productive capacity and cause a shift to the right. The conversation also touches on the potential implications of a $200 per barrel oil price and extreme global recessionary conditions on the quantity demanded and supplied for cars. It is suggested that in such scenarios, there may be a shift towards more market-independent economic regimes, but sustainability is key in ensuring long-term success.
  • #1
mel*k
Hi
I was just wondering if anyone could please help me, I was just wondering what would happen to the supply curve if;
1. There was a recession.
2. And if oil prices increases.

what would cause the supply curve to shift?
thanks heaps for your help

Mel
 
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  • #2
mel*k said:
Hi
I was just wondering if anyone could please help me, I was just wondering what would happen to the supply curve if;
1. There was a recession.
2. And if oil prices increases.

what would cause the supply curve to shift?
thanks heaps for your help

Mel

What changes the supply curve are changes to the cost of production. This includes opportunity cost. In a recession demand is less so the only way the price would go up is if the supply curve changed. One way I could see it changing is a massive destruction of the oil producing infrastructure.
 
  • #3
mel*k said:
what would happen to the supply curve if;
1. There was a recession.

Depends - long/medium/short run.

In the short run, I don't think the AS curve will move because of the previous poster's logic. Only the demand curve shifts.

In the long run it should actually change a little if it's a massive recession. It's because productive capacity will be stymied. In the long run the AS curve is vertical, and shifts to the right by 2-3% every year. (The AD curve intersects this curve). This amount will be reduced by the recession.
 
  • #4
mel*k said:
Hi
I was just wondering if anyone could please help me, I was just wondering what would happen to the supply curve if;
1. There was a recession.
2. And if oil prices increases.

what would cause the supply curve to shift?
thanks heaps for your help

Mel
"Supply curve" of what? Food? Cable TV? iPhones? Aggregate supply (as one poster interpreted it to be)?
 
  • #5
Hi All
thank you all for your help i really appreciate you input, sorry if i didnt explain myself properly the question was worded.

Explain what the impact on quantity demanded and supplied for cars will be if oil prices rise to $200 per barrel. What about if extreme global recessionary conditions also prevail?

thanks
 
  • #6
mel*k said:
Hi All
thank you all for your help i really appreciate you input, sorry if i didnt explain myself properly the question was worded.

Explain what the impact on quantity demanded and supplied for cars will be if oil prices rise to $200 per barrel. What about if extreme global recessionary conditions also prevail?

thanks

Probably, the supply-chains would go relatively private meaning that people with control over oil harvesting and refinement would continue to produce oil and distribute it according to hierarchies of preference. The result would be relatively market-independent economic regimes that did not have to buy oil on the global free market. They would be effectively "above" the recession and would organize economic activities, such as agriculture and food distribution, to benefit the "subjects" of their regimes. If you wanted to be very uncreative, you could call them "welfare states," or maybe "welfare corporations" would be a better term. The problem would be that each would be a ticking time-bomb in that as long as one depleted non-renewable resources like oil, it would have to seek ways to expand its eventual access to oil-rights. This is why the most successful regimes will ultimately be the most sustainable, I think. While some people are fighting over oil and auto-production, others will be zipping around on bicycles and running their computers on solar power. If those people are able to ward off the desperate grasping of the failing welfare-corporations, they will probably suffer less due to oil-inflation and recession - provided they don't get caught in the crossfire of everyone else struggling for scarce resources.
 

1. How does a recession impact the oil industry?

A recession is a period of economic decline where there is a decrease in consumer spending and businesses experience financial struggles. This can lead to a decrease in demand for oil, causing the price to drop. The oil industry relies heavily on supply and demand, so a decrease in demand can have a significant impact on the industry's profits and operations.

2. Why do oil prices increase during a recession?

During a recession, there is often a decrease in production and supply of oil due to decreased demand. However, the cost of producing oil remains relatively constant, leading to a decrease in supply and an increase in prices. This is because the cost of extracting and refining oil does not decrease during a recession, and companies need to maintain their profits to stay afloat.

3. How does the increase in oil prices affect the economy during a recession?

The increase in oil prices during a recession can have a negative impact on the economy. As oil prices rise, the cost of transportation and production also increases, leading to higher prices for goods and services. This can decrease consumer spending and lead to further economic decline. Additionally, industries that heavily rely on oil, such as transportation and manufacturing, may struggle to stay afloat during a recession, leading to job losses and further economic instability.

4. What are the long-term effects of a recession and oil price increase?

The long-term effects of a recession and oil price increase can vary depending on the severity and duration of both factors. In the short term, there may be job losses, decreased consumer spending, and a decrease in the stock market. In the long term, there can be lasting effects on industries that rely on oil and the overall global economy. Countries heavily dependent on oil for their economy may also experience long-term impacts on their GDP and financial stability.

5. How can governments and businesses mitigate the impact of a recession and oil price increase?

Governments and businesses can take several measures to mitigate the impact of a recession and oil price increase. This can include implementing fiscal and monetary policies to stimulate the economy, investing in alternative energy sources to decrease reliance on oil, and diversifying industries to reduce the impact of a decline in one sector. It is also crucial for companies to have contingency plans in place and make strategic decisions to adapt to changing market conditions.

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