An upsurge in the price of commodity results to a decline in the quantity demanded and vice versa. The amount of a commodity supplied in the market increases with an increase in the price of that product, and a price fall leads to a decrease in the quantity of the product provided. An increase in the amount of crude oil by $5 will increase the proportion of gasoline supplied in the market.
The current cost per barrel of crude oil in the United States is $57.24, and an increase in the price by $5 will result in an increased value of $62.24. The hike in price will lead to a rise in the quantity supplied and a decline in the amount of volume demanded by consumers. The increased cost will be reduced by the market forces of demand and supply. Although it is difficult to forecast the price of crude oil due to the shift in sentiments, the average price could be $60 in those three weeks. An increase of crude oil by $5 will result in the general rise in oil prices in the country. The increased rate makes production for businesses more expensive, as well as the cost of living. The Real Gross Domestic Product will be adversely affected by this hike since inflation will rise, consequently leading to a reduction in economic growth.
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In conclusion, an increase in the crude oil price will result in a reduction in the quantity demanded not only for oil but also for other products, which will, in turn, lead to a decrease in wealth. The growth rate of the local economy will be suppressed in those three weeks.
