Demand and Supply for Oil

One of the life bloods of economy is oil. The impact of oil in today’s economy has been witness by consumers many times. Nevertheless we have seen how human spending and travel got affected as the price of oil fluctuates. In contrast almost all energies are generated using oil, to mention few; cars, plane, use oil in order to run their engine. Therefore if oil supply disturbed for one day we can imagine how the US economy can be affected greatly. In this essay I will cover how the price of oil can be affected due to many factors and the impact on consumers. In addition I will cover oils price elasticity and how much OPEC has power determining supply and affect the price in market.

Before I go in depth about oil; I will give general aspect of supply and Demand. Supply is what the producer can offer in the market. Meanwhile suppliers supply any good at a certain point and we call this the quantity supplied in market. In general as the price of good or services in the market increases the supply increase as the same time. In the case of oil almost 40% of current crude oil is provided by OPEC nation. OPEC is a cartel made up of twelve major oil producers countries. “One of the principal goals Of OPEC is the determination of the best means for safeguarding the cartel's interests, individually and collectively”. In addition they determine how many barrel of crude oil they produce to the market each year. Hence currently the goal of OPEC in terms of price per barrel is to put in the region of $70. In deed their market shared dropped from the 70th and 80th due to emergence of other major oil supplier like Russia, Canada however they still have huge power in the market setting prices.

In contrast demand is how much of product a consumer need. The quantity demanded is the quantity demanded by a consumer at a certain price. As the price of good increases the demand for that particular good decrease unless it does not have substitute product. In the case of oil the demand...