1. Global oil price has never in history collapsed as precipitously as it has right now. The historical WTI oil price is shown. Watch the video (link provided). Apply market equilibrium model and production theory to questions.

1) What are the specific demand and supply factors that caused the most recent oil price crash?

2) Apply the D-S model to (1). Graph the initial equilibrium as point A and new equilibrium point B.

3) Which factor (D or S) is more crucial in slashing oil prices? What data are needed to verify the factor?

4) How would these factors affect consumer surplus and producer surplus? Explain with a graph.

5) When the oil price drops below $40 per barrel, a large number of US shale oil companies will shut down temporarily and some may close down for good. Apply the production cost functions to explaining the firm's shut-down and exit decisions in the oil market. Be specific about the relationship between firms' cost structure and their shut-down and exit sequence. Which type of firm is the first to shut down?

6) According to the U.S. Energy Information Administration, the United State, Saudi Arabia, and Russian together accounted for more than 40% of the global oil production in 2019. While the U.S. is the largest oil producer in the world, its production does not have much cost advantage and must import oil from outside to meet its domestic demand. Apply the duopoly or oligopoly model to explaining the oil price crash from the supply shock resulting from the geopolitical conflicts between Saudi Arabia and Russia.

7) Net U.S. energy imports have decreased every year since 2016. Last year's change in net energy trade (crude oil, natural gas, coal, and petroleum products) in the U.S.from 3.6 quads of net imports in 2018 to

0.8 quads of net exports in 2019was the largest change in U.S. energy trade since 1980. How would the low oil price affect the U.S. crude oil trade (import and export) in 2020? Apply the D-S model.

Video link https://www.youtube.com/watch?v=1m2o7biBk9U