Oil hits pandemic high as winter storm pushes demand and poses production risk

-Freezing weather racked portions of the U.S. and fostered demand for fuel while simultaneously threatening to hamstring oil production in Texas.

-The jump in oil prices WTI crude futures up 24% so far in 2021.It touched its highest level since January 2020.

-"Frigid weather means that many oil wells may be shut in. Water is produced along with oil, that water can freeze up equipment," oil analyst Andy Lipow wrote over the weekend.

Freezing weather in regions across the U.S. sparked another rally in energy prices and put West Texas Intermediate crude on pace to settle above $60 a barrel for the first time since the early days of the coronavirus pandemic.

The latest pop in the energy market came as cold weather racked portions of the U.S. and fostered demand for power and fuel while simultaneously threatening to hamstring production in Texas.

"Winter storm and arctic blast of cold weather that is making its way south to Houston may have some severe impacts on the oil industry," oil analyst Andy Lipow wrote over the weekend.

"Frigid weather means that many oil wells may be shut in. Water is produced along with oil, that water can freeze up equipment," he added. "The cold air affects oil production in Canada, North Dakota, Oklahoma, Texas and elsewhere."

More than 150 million Americans are currently under some category of winter weather advisory, accordingto the National Weather Service. As of early Monday morning, the agency was predicting a "major winter storm" to dump heavy snow and significant ice from the southern plains and Ohio Valley into the Northeast.

Lipow, president of Texas-based Lipow Oil Associates, added that while the winter storm likely isn't as severe as the Category 5 hurricanes the Gulf Coast has come to know, odds are good refineries will slow operations and prepare for outages.

He also noted that the storm is partly to blame for a steady rise in gasoline prices over the last week.

The average per-gallon price of regular gasoline rose to $2.46 from $2.41, according to the latest weeklyreport from the U.S. Energy Information Administration. Analysts expect that the EIA's next weekly report, due Tuesday, will show that retail gas prices climbed further.

The recent rally in crude prices also marks an extension of the oil market's rebound since the coronavirus pandemic gutted demand for petroleum products throughout much of 2020 and sent crude prices reeling in April.

1. Explain, using supply and demand analysis, why the price of oil crude has been

2. Do you think a) the supply and b) the demand for crude oil is price elastic or inelastic? draw curve diagram for the demand and for the supply. and Justify your choices and explain whether this means any given change in supply or demand will have a bigger effect on the equilibrium price of quantity.

3. Illustrate the effect of the Freezing weather on the demand for crude oil using a demand curve diagram. , and explain it

4. How might companies such as ARAMCO and SONATRAC react to an increase in the price of Crude oil ?draw curve diagram to illustrate your answer ?