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Essay / Research Paper Abstract
This 6 page paper draws on tools of economic theory in order to assess the importance of economic concepts in the determination of the world oil price since 1973. The paper looks at numerical supply and demand curve equations, the excess demand curve, and game theory. The bibliography cites 3 sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEoileco.rtf
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Unformatted sample text from the term paper:
demand is high and rising. Looking at the theories seen in economics these have an important role to play when it comes to the understanding of the oil market and
the role played by OPEC. In understanding the role of supply and demand we first need to look at the model and
the apply this to the oil industry. The way in which any market determines price will be a result of supply and demand. These variants will always be in state
of flux, with both the supply of the product, in this case oil, varying and the amount of demand also fluctuating due to other related factors, such as the economy,
disposable income and other factors. If we chart this it we can illustrate the willingness to supply and the willingness to buy in a graph. The basic premise is that
where there is a demand that exceeds supply the price will increase until there is a reduction in demand to the extent that the demand will decrease to the same
point of that of supply. Where the supply is in excess of the demand the converse is true, the price will fall until sufficient buyers are attracted to the market
with the lower prices to take up the excess demand (Nellis and Parker, 2000). . This is shown in figure 1, where the graph indicate the point of equilibrium where
demand equals the supply and the price is determined. Figure 1; Supply and Demand Graph. The role of OPEC is to control the supply side to
prevent the volatility of oil prices, but also to ensure that the oil produces make sufficient profit to support the on going production of oil, as this is also costly
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