Supply and Demand

Paper Summary:

In the paper, supply and demand are examined as separate components and how consumer conceptions of wants, needs and desires can be and often are, manipulated to keep the petroleum industry from being fully governed by normal market forces. The paper explains that nevertheless, the petroleum industry is often used to illustrate the characteristics of supply and demand.

From the Paper:

"One of the most important economic theories in relation to the oil industry, oil as a commodity and oil use is the theory of supply and demand. Simply put, as world markets are pressed to supply higher utilization rates in existing markets and by the addition of newer consumption markets such as China to the overall petroleum market, the price of oil inevitably increases. The petroleum industry is not like other product industries where if a product is selling well then new factories are built to supply the additional demand. In the petroleum industry, it takes years to source and develop oil supplies and the central commodity is a finite product as it is. The world's supply of oil only gets smaller with the passage of time."

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