Oil Prices – Why the sudden plunge?
May 14, 2017
Oil is an important factor of production. Due to her lack of natural resources, Singapore depends on imported oil in her domestic production processes. So, how has the fall in oil prices affected Singapore? Simply put across, a fall in the price of oil will lead to a fall in the domestic cost of production. When this happens, firms will increase their production, leading to an increase in the economy's Short-run Aggregate Supply (SRAS), and a fall in the General Price Level (GPL) in the country, hence dampening inflationary pressures in the country. Furthermore, when firms increase their production, they will require more factor inputs like workers, hence this will lead to an increase in the derived demand for labour, thereby reducing unemployment in the country. Of course, the above is only one of the many consequences the fall in oil prices have had on Singapore.
Most students are able to think of some consequences brought about by the plunge in oil prices. However, most of them do not completely understand what
have caused that to happen. Such knowledge is of key importance in helping students see a complete picture of this global issue. Thus, we are sharing this video so that students can gain a better insight into what have caused the fall in the global prices of oil.