Demand and Supply

Demand and Supply

Article:

Demand growth now the focus for the oil market

Summary:

The article is about the demand and supply of oil in the market. The main point of the article is “Demand growth now the focus for oil market” which is representing that the oil industries should focus on the increasing demand and its supply for equilibrium. This article is a concern with the demand and supply concept of the economic (Brower, 2018). The demand for oil is increasing at a high speed that creating several issues to proper supplies those also creating problems in the oil market. In concern to this, the inductor should have focused on the proper supply to solve the potential problem of the issues.

Figure- Demand and supply of oil

Demand and Supply

Source: (canadianmarketreview.com)

On the basis of above diagram, it is identified that the demand of the oil will not decrease in any condition but the supply of the oil products are fixed (Ruttan and Thirtle, 2014). On the other side, it can also be said that the demand curve of the oil industry is also sifting with the new equilibrium point. In this diagram, the D1 is previous demand curve that is sifting at D2 because of increasing demand but the supply of this product in the market is not increasing. Moreover, the price of the oil products is also shifted from P1 to P2 because the increasing demand affects the price also. So it is expected that the crude oil price will be increased in 2018 (Brower, 2018).

This article defines that the demand of the oil produced in the international market is increasing as a comparison of the supply that creating difficulties for the supplier organization. There are limited sources of the natural oil and there is rare chance to increase the supply so that supply looms over oil futures. In order to provide balance to the demand and supply of oil, the consumer needs to reduce the use of the oil-related product and try to find or use a substitute of the oil products as energy.

The oil industry is based on the oligopoly market structure where there are only a few firms dominate the market with many suppliers (Matsumura and Tomaru, 2012). In order to describe this article, the equilibrium of supply and demand elements will be applied. The demand for oil in the US was increased in the last year and it is estimated that it will be more than bull expectation in this year. As same, it will not occur in the only US but also the demand for the natural oil will also increase in all the countries due to increment in the oil consuming products. The change in the supply or demand is necessary for the effective equilibrium otherwise the demand will much high then supply that will affect the price (Cashin et al., 2014). According to the Energy Information Administration (EIA) and International Energy Agency (IEA), the balance of supply of energy oil is loosening that is also the main reason of the increment in the demand.

References:

Ruttan, V. and Thirtle, C., (2014) The role of demand and supply in the generation and diffusion of technical change(Vol. 21). NY: Routledge.

Cashin, P., Mohaddes, K., Raissi, M. and Raissi, M., (2014) The differential effects of oil demand and supply shocks on the global economy. Energy Economics44, pp.113-134.

Matsumura, T. and Tomaru, Y., (2012) Market structure and privatization policy under international competition. The Japanese Economic Review63(2), pp.244-258.

CANADIAN MARKET REVIEW (2015, 16 Jan) The Price of Oil and the State of the Economy. Retrieved from: https://canadianmarketreview.com/2015/01/16/the-price-of-oil-and-the-state-of-the-economy/ (Assessed at: 5th April, 2018)

Brower, D. (2018, 8 Feb) Demand growth now the focus for oil market. Retrieved from: http://www.petroleum-economist.com/articles/markets/outlook/2018/demand-growth-now-the-focus-for-oil-market (Assessed at: 5th April, 2018)

 

 

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