Bolivia may have the second largest gas reserves in Latin America but it also has an acute shortage of diesel. People have blamed a variety of causes: smugglers, the government and nationalisation. In truth, the cause may be a combination of all these factors, but whatever the cause, the diesel shortage is acting as a significant constraint on further economic development and is an ongoing headache for the President Evo Morales.
Fuelling Bolivia’s crisis BBC News Online (8/11/07)
Questions
| 1. | Use supply and demand analysis to illustrate the reasons for the shortages in diesel in Bolivia. |
| 2. | Explain the impact that fuel subsidies may have had in causing the shortages of diesel. Use supply and demand analysis to illustrate your answer where appropriate. |
| 3. | Discuss the underlying factors that may be leading to the shortages in diesel. |