supply and demand and oil

oil prices fluctuate due to

• the market forces of supply and demand

• the amount off oil in the Middle East

• the big companies trying to maximise profits

the market for oil is complicated because

• its International and OPEC controls the entire market process

• it is made up of many markets - crude oil, petrol and petrol by products

• there is no single price for oil or its many by products so consumers can be ripped off

crude oil production is dominated by

• OPEC russia and USA

• OPEC and Europe

• every country has enough oil for their own development except Japan

Petrol is the most important use of crude oil in most countries because it is used for

• raising the revenue and GDP

• expanding trade markets and nw exploration

• transportation heating and electricity generation

Petrol has inelastic demand because

• Australia is a nation with a love of private cars , personal freedom and the love of driving great distances

• petrol is a necessity, used often and a small percentage of income

• the amount of oil is limited and demand determines who gets it - like the wealthier economies

one of the major demand factors driving up the price of petrol has been

• Opec's decision to change the oil quota

• the numbers of cars on the road

• the strong economic growth of major economies like China and India

which if the following would NOT increase the demand for petrol

• bigger SUV;'s become more popular

• improved access to better free public transport

• access to better roads and freeways, and parking stations

Global supply and price of oil is determined by

• each individual country sets their own prices - its very cheap in the US compared to Europe

• the world bank sets oil prices to allow all countries access to such a valuable resource

• OPEC who control most of the oil reserves and collude to determine what amount is supplied

Opec is able to increase its revenue because

• a decrease of supply with elastic world demand means they are able to sell more

• they can decide who gets it by how willing they are to pay - like US will pay more because demand is inelastic

• a decrease in supply with inelastic demand causes countries to pay more and despite the price increase buy nearly as much

which is NOT a supply shock

• Oil tankers and oil wells blown up in a war

• new discoveries of oil offshore in oil

• new discoveries off major untapped oil in the Great Barrier Reef