Iran controls a large supply of the world's fossil fuel and is a major player in the OPEC cartel. OPEC is arguably the most infamous cartel organization and has major influence on the price of oil worldwide. Oil prices grew to a high of $98 per barrel Tuesday with the news that Iran plans to cut off Europe's supply of crude oil in the near future.
The European Union has established plans to implement an oil embargo against Iran this summer in effort to pressure Iran to abandon its nuclear energy program. Iran is hoping to speed up the process of detachment by threatening to cut off the EU's oil supply before the sanctions take effect.
There are multiple supply and demand shifts illustrated in this article.. If the EU loses Iran's supply of oil, the nations will need some time to find new oil suppliers to keep the price of oil at equilibrium. Iran announcing that they will limit the supply of oil shifted the supply curve to the left, causing a raise in price.
The government announced that that the number of available jobs in the United States jumped to a three year high in December. Consumer borrowing has also increased significantly. These two factors contribute to increased consumer spending, which shifts the oil demand curve to the right and in turn raises the price of oil.
However, the article also says that Americans are starting to use less gasoline. A MasterCard survey estimated that US gasoline demand is around 5% lower this year than it was last year. This could be explained by the fact that oil prices have reached a point where people have begun to look for substitutes.
Link to article: http://www.google.com/hostednews/ap/article/ALeqM5jeblknRmhkZtgLyZ7HGu9lYcq4cg?docId=a1c13fb26eac4ca3ae132b25b3f70849
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