what is supply shock 
a supply shock is an unexpected event that suddenly changes the supply of a product or commodity resulting in an unforeseen change in price supply shocks can be negative resulting in a decreased supply or positive yielding an increased supply assuming aggregate demand is unchanged a negative or adverse supply shock causes a product s price to spike upward while a positive supply shock decreases the price 1understanding supply shocka positive supply shock increases output which causes prices to decrease due to a shift in the supply curve to the right while a negative supply shock decreases production which causes prices to rise supply shocks can be created by any unexpected event that constrains output or disrupts the supply chain including natural disasters and geopolitical developments such as acts of war or terrorism 1a commodity that is widely perceived as vulnerable to negative supply shocks is crude oil because a majority of the world s supply comes from the volatile middle east region as of 2022 the organization of the petroleum exporting countries opec member nations located in the middle east africa and south america accounted for 79 5 of world oil reserves with middle east members alone accounting for 67 2 of that supply 2 oil supply has also been affected by russia s invasion of ukraine sending gas prices in the u s skyrocketing in 2022 34examples of supply shockthe struggles of a single firm can cause a supply shock if the company is a large producer of high demand products according to reportage by cnbc this was the case when glencore announced in september 2015 its plans to close two major copper mines in the democratic republic of congo and zambia removing 400 000 tonnes of copper from the global output the decision came in response to a prolonged slump in copper prices therefore this particular supply shock was positive for competing firms 5according to a report in the economist a slowdown in chinese demand for copper caused prices to drop for the previous decade demand had grown at an annual rate of more than 10 until it fell to 3 to 4 in 2015 this drop in the price of copper highlights how a concentrated change in demand can influence prices a change in demand must be abrupt and perceived as temporary to qualify as a shock as is the case on the supply side 6