Analysis Of The Article ' Hoping For A Price Surge, Oil Companies Keep Wells ' Reserve '

1159 Words Sep 6th, 2016 5 Pages
In the article “Hoping for a Price Surge, Oil Companies Keep Wells in Reserve,” the case is unique. At the time, the price for oil in 2015 was significantly lower than the previous year. The almost 60% cost difference led to as many as 4,000 oil companies keeping their oil on reserve until prices for the market rose. Anadarko Petroleum is one of the companies holding reserves. They were acting accordingly to the law of supply which states that when the price of goods increases, so does the quantity and vice versa. So, with the price lower in the market for oil, the quantity was lower in result.
The reasoning makes sense. The Anadarko Petroleum and the other companies wanted to hold their pull from their underground stock until the prices rise again, but issues arose from the actions, or lack of. If many companies are holding out on their goods, that means that not as many goods are circulating in the market. Activity in the market is the way that demand and prices change. Although everyone wanted the best outcome from the situation, inevitably some will suffer and some will benefit more than others. The product was there and readily available, but it was not being released into the market.
Also, by holding out on drilling, the companies were being hurt further because they were not exercising their owned resources and their employees were not working. With the lack of need for full capacity workers, many might have been laid off which, in turn, would hurt the economy…
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