America’s Oil Bonanza The shale revolution has increased the oil and gas flow in America tremendously. The International Energy Agency has predicted that the United States would become the world’s largest oil producer by 2020, leaving Saudi Arabia and Russia behind.

Source: The Economist, November 17, 2012

a. What is the effect of the shale revolution in the U.S. on the world price of oil?

b. How does the change in the world price of oil affect the quantity of oil produced by members of the OPEC with a comparative advantage in producing oil, the quantity it consumes, and the quantity that it either exports or imports?