Business Economics - The Oil Market

Running Head: BUSINESS ECONOMICS
Business Economics
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BUSINESS ECONOMICS
1
Introduction
The oil market across the globe has faced various important phases in the period of the
last 30 years. These changes have posed a significant impact on the structure of the oil market
across the globe and the resulting fluctuations on the level of the price and the output share. The
question however gives rise to the possible question that why are the price of the crude oil
around the world in comparison to the prices of the other goods in the market. For analyzing the
set of these questions it is very important that we consider the historical, perspective of the
global market of oil prior to the 1970s where the prices for the oil were fixed by the negotiation
pattern among the major private sector companies responsible for deciding the price of oil in the
global market.
Discussion
Demand Patterns for Crude Oil in the World
The Brent Crude Oil has recorded the prices that have increased to the share of 7 dollars
per barrel. If we analyze the demand of crude oil from the geographical perspective it can be
stated that in the month of September, the International Energy Agency will expect that the
global share of the crude oil will fall to 2.1 million barrel per day from their peak supply in the
month of July to 76.2 million per barrel per day and the fall of the 0.3 billion per barrel to the
recorded fall of the additional 0.3 million per barrel in the month of October (Baumeister &
Kilian, 2016).

BUSINESS ECONOMICS
2
Disruptions in the global crude oil supply (www.eia.com )
Price elasticity of the demand of gas in the United States
In the study on the price elasticity of the demand of gas in the United States, the study by
Espey has examined that there are 101 different studies that should be found in the short run
basis, with the average price elasticity of demand for gasoline in the United States is recorded at
-0.26 which is referred to as the 10 % hike in the price of the gasoline that will get lowered by
the quantity demanded by the average rate of 2.6%. In the long run, the price elasticity of the
demand for the gasoline in the United States will result in the quantity demanded to decline to
5.8%. (Toquica et.al 2020)