Impact of Oil Market Dynamics: Business Economics Report

This report provides a comprehensive analysis of the global oil market, particularly focusing on the period from the 1970s to the 2000s. It examines the demand patterns for crude oil, considering geographical perspectives and the impact of disruptions in supply. The report delves into the price elasticity of demand for gasoline in the United States, exploring both short-run and long-run scenarios and the factors influencing these elasticities, such as economic growth and weather conditions. It further investigates the impact of price changes on the revenue of crude oil exporters, the income elasticity for gas demand, and the price elasticity of gas supply. The analysis extends to the effects of market outcomes, international trade, state policies, and the overall economy, including the role of OPEC decisions and the impact of events like the 9/11 attacks. The conclusion summarizes the various political, economic, and environmental factors that have shaped the global oil market during the analyzed period.

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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).

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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)

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Price elasticity for the gasoline demand in the United States (www.eia.com )
Factors influencing the price elasticity for the demand of gas in the US
The price elasticity of demand for gas in the United States is affected by the various
factors like the Economic growth rate in the United States. The strength if the economy of the
United States influences the natural gas position in the market structure of the country. The
economic related increase in the consumption rate will be particularly strong in the specific
industrial sector that will use the demand of the natural gas in eth United States as a fuel and the
feedstock, The other factors that influence the price elasticity of demand are the severe weather
conditions that will affect the supply the natural gas in the country (Calvano & Polo, 2020).

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Impact of the Price Changes on the revenue share of the crude oil exporters
The price changes of the various crude oil exporters are mainly due to the various factors
of the combination of the recession factor in the economic activities in the United States that has
resulted in the sharp drop in the prices of the oil after the tragic event if September 11 in the year
2001. In response to these factors. The members of the OPEC organization have agreed to
mutually agree to reduce the overall production of the oil by 1.5 billion barrels per day (Prest,
2018).
The income elasticity for the demand of gas
The empirical estimates of the income elasticity for gas in United States report a mean
elasticity in the income for the demand of gas to 0.28 for the short run period and the 0.66 mark
for the long run rate. The income elasticity for the gas in countries like the United States are
characterized by the mixed effects of the multilevel met regression effect. The income elasticity
of the demand for gasoline in the United States demand is on the average mark according to the
surveys conducted in this field. The mean elasticity for the gas demand in the United States will
be reported at 0.1 for the short term period and the 0.23 mark on a long run basis.
Price elasticity for the Supply of gas
The price elasticity for the supply of gas specially in the context of the United States has
fallen to the 28% mark from it speak mark in 2014 that was accounted to 2.68 $ per barrel per
day till 2014.This makes gasoline a relatively inelastic product that will refer to the various
changes in the price level that will influence the demand of the gasoline in the global market
structure (Pless & Benthem, 2019).

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The price elasticity of the gasoline in the United States (www.economicsdiscussion.com )
Effect on the market outcome, effect on the equilibrium in the market
During the period in the 1970s till 2000, the production of on the global basis was
affected by a number of the various factors. In the year 1998, the United Nations has also
approved of the resolution that they have followed which allowed Iraq to increase in the share of
the oil exports as an initiative of the humanitarian oil program (Amir, Gama & Werner, 2018).
Effect on the international trade, the state policies and the effect on the overall
economy
The effect of the decline in the oil prices from the 1970s till the year 2000, the
international trade was characterized by the combination of the recession rates in the economic
activity and the softening of the prices in the oil market. In response to this market condition

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there was a mutual collaboration among the OPEC countries to reduce the oil production rate in
order to prevent the economy from the rising rates of the recession.
Conclusion
Finally it can be said that the period from 1970s to the 2000, there were rise of the wide
range of the political, economic and the various environmental factors that are relevant in the
global oil market, The OPEC decision of declining the oil production Russia, Norway and
Mexico along with the United States have announced an export cut on the oil prices.

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References
Amir, R., Gama, A., & Werner, K. (2018). On environmental regulation of oligopoly markets:
emission versus performance standards. Environmental and Resource Economics, 70(1),
147-167.
Baumeister, C., & Kilian, L. (2016). Understanding the Decline in the Price of Oil since June
2014. Journal of the Association of Environmental and resource economists, 3(1), 131-
158.
Calvano, E., & Polo, M. (2020). Market Power, Competition and Innovation in digital markets:
A survey1. Information Economics and Policy, 100853.
Pless, J., & van Benthem, A. A. (2019). Pass-through as a test for market power: An application
to solar subsidies. American Economic Journal: Applied Economics, 11(4), 367-401.
Prest, B. C. (2018). Explanations for the 2014 oil price decline: Supply or demand?. Energy
Economics, 74, 63-75.
Toquica, D., De Oliveira-De Jesus, P. M., & Cadena, A. I. (2020). Power market equilibrium
considering an EV storage aggregator exposed to marginal prices-A bilevel optimization
approach. Journal of Energy Storage, 28, 101267.
Bibliography
NYUsterncase article