QUESTION 4 Oil prices climbed above $80 (59) a barrel on Tuesday, hitting their highest level in three years as the pound slumped. Brent crude, the international benchmark, rose to as much as $80.69 on the day, the most since October 2018. Prices have been rising for seven consecutive days on the back of the energy crisis in Europe. Analysts believe that oil prices will continue to rise amid surging demand and tight supplies. Investment bank Goldman Sachs said Brent could hit $90 per barrel by the end of the year, warning that rising input costs, higher gas prices, and weaker growth were likely to weigh on European corporate profit growth for 2021.

4.1 With the aid of well-labeled diagrams, critically discuss how supply shock could result in higher prices. (10 marks) 4.2A high-stakes game of oil diplomacy pits Saudi Arabia against long-time ally Abu Dhabi. And the result of their fight will shape not just the price of oil for the next year, but the future of the global energy industry. Discuss oil cartels' influence on the oil price movements globally and how that affects the economy of non-oil-producing countries.