Submitted by: Submitted by xoxolyn
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Category: Other Topics
Date Submitted: 02/26/2011 12:56 PM
The price of oil is significantly impacted by the principles of supply and demand. During the past 65 years, the price, when adjusted for inflation, has gone from $17.92 per barrel in 1946 to today’s price of $98.23. In 1980 domestic oil prices hit their high mark of $99.11, yet in 1986 the price had fallen to $28.70 (inflationdata). These extreme price shifts cause consumers to question the reasons for the drastic rise and fall of oil prices.
The demand for oil is affected by many factors. Extremely cold winters will increase demand for heating oil. (Lichtenstein).
Our personal driving habits have an affect on demand for oil. With more than 137 million registered vehicles, the collective driving habits of those vehicles can strongly influence demand for oil (numberofautos). The U.S. Department of Energy has determined that for each 5 miles per hour one drives above 60 miles per hour, one’s average costs per gallon increases $.24 (Willick).
Consumer preference and convenience is another factor in the demand for oil. There are approximately 50 billion plastic bottles of water sold in the U.S. annually. Approximately 1.5 million barrels of oil are used annually to manufacture plastic water bottles (Peak).
The supply of oil can be influenced by natural disasters. During the Hurricane Katrina disaster, the U.S. temporarily lost approximately 25% of the country’s oil production (Lichtenstein).
The Organization of Petroleum Exporting Countries (OPEC) has significant impact on the world’s oil supply. OPEC controls approximately two-thirds of the world’s oil supply and may choose to restrict supply to influence price (Lichtenstein).