Sometimes speculators get it wrong. In the months before the Persian Gulf War, speculators drove up the price of oil: The average price in October 1990 was $36 per barrel, more than double its price in 1988. Despite the fact that Saddam Hussein set fire to many of Kuwait's oil fields, the price of oil plummeted to about $20 per barrel after the very short war. The price of oil remained at this level for years.

a. Is buying oil for $36 a barrel and selling it for $20 per barrel a good business plan? How much profit did speculators earn, or how much money did they lose, on each barrel?

This is a (A: Brilliant, B: Daft) plan.

Earnings per barrel: $ (?)

b. Why did the speculators follow this plan?

A: Speculators bet that the war would lead to the collapse of the Oil Producing and Exporting Countries (OPEC)cartel.

B: Speculators thought the price would stay high.

C: Saddam Hussein tried to take over the Kuwaiti oil fields so he could expand the supply of oil.

D: Speculators believed Saddam Hussein's forces would win the war.

c. When the speculators sold their stored oil in the months after the war, did this massive resale tend to increase the price of oil or decrease it?

Selling the oil drove the price (A: Up, B: Down)

d. Do you think that many consumers complained about speculators, or even realized that speculators were influencing the price of oil, in spring 1991?

It is (A: Likely, B: Unlikely) that consumers understood the role of speculators, so they probably (A: Did not, B: Did) complain.