Demand And Supply Of Oil Essay

909 words - 4 pages

IntroductionOil is one of the most valuable and scarce energy resources in the earth, and in order to assess the recent developments in the price of Oil in world trade, it is important to analyze the underlying forces of demand and supply. As energy is an important vehicle of production and growth, Oil is still its main source and has no competing substitute to replace it altogether in the foreseeable future. The UAE is one of the biggest suppliers of the Oil in the world, and as a member of OPEC price and supply of Oil is controlled by the 10 members of the OPEC and Non-OPEC countries.Yr Oil Price Tq Oil Demand Tq Oil Supplied OPEC Supplied OPEC ...view middle of the document...

The graph bellow shows the price of Oil Verses the Demand of Oil by consumers.The effect of increase in demand (excess of demand) for Oil causes the curve to shift outward and leading to an increase in Oil prices. On the other hand Suppliers always tries to follow the demand curve by increasing their supply of Oil to keep the prices of Oil stable.Supply of OilFaced with such an inelastic demand within a certain affordable bad of prices, Oil producers could always increase their revenues if they offer fewer units for sale. So supply restriction is then a method by which Oil producers could increase their revenues. And they try to maximize their Oil revenue without interrupting the demand of Oil by the consumers. They try to keep price level under which new Oil development and alternative energy introduction cannot progress largely. And keep price level and fluctuation under which long-term investment can be made surely in their Countries and Consumers countries. The graph bellow shows the Supply curve of Oil.The effect of increase in Supply (excess of Supply) for Oil causes the curve to shift inward and leading to a decrease in Oil prices. Therefore Consumers will always wait to see if the price will keep on decreasing to maximize their benefit and buy more Oil for low prices. On the other hand Suppliers always tries to follow the demand curve by decreasing their supply of Oil to keep the prices...

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