Demand And Supply Of Oil Prices - 2413 Words

The sporadic nature of oil prices has over the years posed as a great deal of concern to economists, investors, financiers, consumers, analysts and other relevant stakeholders. In a perfect market, the price of a commodity is an indication of the present circumstances as well as future signals that could impact demand and supply. Ordinarily, we expect prices of commodities to move in response to changes that affect demand and supply at a relatively ‘normal’ rate. When prices change drastically within a short period and consistently over time, then such market is fraught with high volatility – a typical case of the crude oil market. A sudden increase in oil price becomes a concern for the consumer as it results into a reduction in his purchasing power; thereby struggling with allocation of income among competing demands. For an investor, high price volatility increases risk associated with the investment and also creates uncertainties. High volatility will impact the macroeconomic variables in an economy including but not limited to unemployment, inflation, consumption, investment and industrial output (Ebrahim, Inderwildi et al. 2014a). This paper seeks to evaluate oil price volatility by examining the trend of oil price from 1970 to 2013. Attempts will be made to explain the causes and root factors influencing price changes. Finally, a view on whether oil price volatility is inevitable will be established. Annual U.S. Imported Crude Oil Prices Nominal vs.Show MoreRelatedDemand And Supply Of Oil Prices1152 Words   |  5 PagesCrude Oil Industry is central to United State, its future and the world economy. Demand and Supply fundamentals have traditionally determined the price of crude oil. New price drivers have emerged with time. Complexity is on an increase in the oil market, having impact on the oil prices with a variety of factors. The fluctuation of oil price has reached an unprecedented level, with the world crude oil price widely swinging per barrel over the months. The prices reflect the crude oil price swingsRead MoreOil Prices: Demand and Supply1496 Words   |  6 PagesOil Prices: Demand and Supply The demand for oil has been predicted to increase despite the high price of oil. Sources of the demand for oil continue to increase with time worldwide. As countries industrialize and develop, their oil consumption increases together with their economy. Examples of countries that have their economy growing fastest and steadily are India and China. These two countries have their economy growing and the impact their economic growth has on oil demand is great. SomeRead MoreThe Effects Of Oil Prices On The Demand And Supply Of Oil1001 Words   |  5 Pagesthe demand and supply of oil, caused by politics, business changes and cycles, and technological advances, cause oil price volatility across world economies. These factors explain the fluctuations that the global oil industry has faced since early 1990s (Aasim, 2015: 5). The economic boom between 2003 and 2008 caused an increase in oil prices, especially in oil-consuming economies such as India and China. On the contrary, petrol expor ting nations could not match the high demands for oil. Oil pricesRead MoreOil Prices: Driven by Supply and Demand959 Words   |  4 Pages1. Oil prices are almost entirely driven by supply and demand. On the supply side, OPEC seeks to control the prices by virtue of controlling the output of its member countries, which are responsible for around one-third of the worlds oil production (OPEC, 2012). That OPEC can do this is facilitated by the fact that bringing new oil production online takes a long time. Thus, by setting output on a monthly basis, OPEC can control the supply. 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More frightening still, this situation may get worse before it come back to normal. No one can exactly predict when the pendulum will soon swing back again since all uncertain factors existing. From the supply side of view, the OPEC is the main producer, being prepared to add or subtract productionRead MoreThe Core Concepts Of Economics1241 Words   |  5 PagesIntroduction The two factors Demand and Supply are the core concepts of economics. Demand states the quantity of a product one requires to fulfill his needs at particular price stand. On the other hand supply refers market offering of a product at specific price level. There are numerous constituents that affect the Demand of a product. 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From transportation to heating homes and businesses, oil prices are always dramatically changing due to the constant change of supply and demand. The economic impact that the price of oil has on the U.S economy continues to rise and fall due to political instability. Americans especially have a heavy reliance on oil, especially on foreign origins. The increasing price of o il has spiked large concerns and has become a major global debate. Many sources