Econ Test 1 sheet.docx - 1 What has happened to the...

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1. What has happened to the production of oil in the US? What can explain that? Production of oil in the US has been maintained even while prices steadily declined over the span of a year from over $100 a barrel to just over $50 a barrel. Even crude oil inventories have risen to a record high of 465 million barrels in 2015, which is more than 60 million barrels than the highest inventory level of 2014. Production levels have been maintained by strategically positioning oil rigs in the most productive plays and efficiently cutting costs. If and when oil prices rise back to where they were, or higher, the inventory surplus could pay off big. If prices never recover, the adaptability to maintain production in the sector is impressive. 2. How should we expect the cost of oil (referring to #1) to affect the cost of producing gasoline, diesel and 3. (Referring to #2) which other major industries are likely to be affected? How? [HINT: Think of (a)

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