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Australia Oil Demand Supply - HI5003

   

Added on  2020-03-04

6 Pages1330 Words59 Views
Oil 1DEMAND AND SUPPLY OF OIL IN AUSTRALIAStudent’s NameCourseProfessor’s NameUniversity(City) StateDate

Oil 2Demand and Supply of Oil in AustraliaGlobally, oil is described as the engine of the economy. Mainly, this is because oil is asignificant raw material for many industries. For this reason, any changes in its supply anddemand considerably influence the rest of the economy. As such, alterations in its demand andsupply affect the prices of the commodity, which then influences the prices of other goods andservice. According to Jessica Resnick-Ault’s article, the prices of oil dropped. In her article ‘Oilfalls despite steep draw in US crude,’ reveals that the prices of oil in the country have fallen byapproximately one percent. Notably, the changes in price of the commodity are as a result ofchanges in its demand and supply in the global market. It is worth pointing out that the article implores the interests of various groups, amongthem individuals and firms. Firstly, households may find the article interesting simply becausethe global prices of oil influences their utility bills with respect to cooking gas and vehicle fuel.In the same way, manufacturing firms may take keen interest in the article because oil is asignificant component in many production processes. For this reason, changes in the price of thecommodity greatly influence their cost of production, which in turn affect the prices they chargefor their goods and services. In addition, refining companies might also find the articleinteresting as it informs them on the factors that cause significant changes in the prices of oil inthe country and the rest of the world. Fundamentally, the issues presented in the article can be presented in terms of economicconcepts and theories. In this case, the concept of the law of demand and the law of supply canbe applied to explain the changes in the price of oil in the country as well as the rest of the world.In economics, an increase in the demand of a product brings about a rise in its price (Amadeo,

Oil 32017). In the same way, a drop in the supply of the commodity leads to an increase in the priceof the product. Mainly, this is because a decrease in supply creates pressure on the availableamount, thereby pushing its prices upwards.In the article, Resnick-Ault suggests that the gradual slowdown in the demand for oil hassignificantly influenced the falling of petroleum prices in the country. Predominantly, thereduction in the quantity demanded is as a result of the ending of the peak of the summer drivingseason. In addition, the demand for crude is expected to slow down following decreases inrefinery needs by companies. Furthermore, it has slowed as a result of a decline in the number ofsummer road trips within the country. All these factors combined, have adversely affected thelevel of demand for oil and its related products in the country. Consequently, a reduction in thedemand for oil has caused a downward pressure on the price of the commodity in the country. Effects of low demand on oil pricesPrice supply curveP1 P2D2D1 Q2 Q1QuantitySource: (Khan, n.d.).In addition to demand, the supply of the commodity has played a major role ininfluencing its price level in the country. More specifically, there is a global surplus of oil from

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