As explained in recent world business reports, "the inability of OPEC and other major oil exporting countries to limit the supply has sent oil market into turmoil" in recent weeks. However, the following new development has taken place very recently.

"Saudi Arabia, Russia and the US agreed to lead a multinational coalition in major oilproduction cuts after a drop in demand due to the coronavirus crisis and a month-long SaudiRussian feud had devastated oil prices."

"The deal, sealed early on Monday (AEST), came after President Donald Trump intervened to help resolve a Saudi-Mexico standoff that jeopardised the broader pact."

"Mr Trump, on Twitter, said the deal will "save hundreds of thousands of energy jobs in the United States" and he thanked the Russian and Saudi Arabian leaders for their co-operation."

Donald J. Trump @realDonaldTrump

a. Explain the main characteristics of the world oil market by using a suitable market structure (covered in this course). (2 marks)

b. Using the demand and supply model explain step-by-step what happened in the world oil market with valid arguments during the COVID 19 pandemic and explain the way in which the latest agreement (explained in the above article) can stop further decline in the world oil price. (2 marks) c. Why do you think OPEC is becoming less effective in controlling world oil price? Briefly explain. (2 marks)

d. Why do you think the recent deal will save hundreds and thousands of energy jobs in the US as the President Trump has mentioned? Briefly explain. (2 marks)

e. Using the Prisoners Dilemma game explain the way in which collusion is better than competition for oil producers.(2 marks)