Individual Report: Commodity Prices and World Oil Price Connections

This report examines the relationship between oil prices and the automotive market, employing economic principles to analyze their interplay. It begins with an introduction highlighting the connection between oil prices and car sales, followed by an analysis of demand and supply dynamics, including elasticity. The report further explores the effects of substitutes and complements, particularly the shift towards alternative fuels like electric vehicles. It incorporates relevant data over a 10-year period, defining key economic concepts and utilizing diagrams to illustrate the analysis. The conclusion summarizes the complexity of the oil and automotive industries, emphasizing how the natural laws of supply and demand are influenced by factors unique to the oil market. The report concludes that the oil industry and its mechanisms are complex, while the automotive industry is simpler, although the role of the oil industry brings fractures in its simplicity. The report also includes references to academic sources.

Organizational Behavior
and Management

Table of Contents
Introduction
Link between Oil prices and automotive market
Demand and Supply analysis
Elasticity of Demand and Supply
Effects of Substitutes and Complements
Conclusion
References

Introduction
In this discussion various points has been highlighted that makes
the relation between automotive vehicles and car products
much more easier to understand and relate with each other.
Included in the discussion are various economic concepts as
well, so that understanding can be made also very simpler from
basics. The discussion starts with understanding nature of
relation between oil prices and sales of cars, and how do they
influence each other. Then it is followed by use of economic
concepts of demand and supply, elasticity of demand and
supply, and at last effect of substitution over relation of two
commodities.

Link between Oil prices and automotive
market
Gasoline and Petroleum is seen as the most frequently and most
commonly used fuels inn running of vehicles. As, both of these
products are extracted from crude oil, then the prices of crude
oil are seen affecting them as well. A decrease in prices of
crude oil resulting in decrease of prices of petroleum as well,
indicates that consumers making use of vehicles are now left
with more disposable income and they shall be making more
expense now over these products, also they can be make
purchase of new vehicles as well.

Demand and Supply analysis
Demand analysis
The impact of prices of Oil or Gasoline and the comparatively
relative products are direct over the demand of cars in the market.
This is the most common fact known in the market that oil forms
the petroleum products that is most essential and most common fuel
for cars and other vehicles as well.
Now since the relation between the two is direct, the effect of prices
of Oil over demand or vehicles in the market could be analyzed
from two points. One, when prices of crude oil rises in market and
another is when prices of crude oil falls. In both the conditions, the
most favorable condition for demand of vehicles is formed when
prices of crude oil falls.

Continued…
Supply Analysis
First of all considering the supply factors and conditions for Oil
market, it is well understood that condition prevailing in Supply
side of Oil are under the influence of many other global factors.
They are consisted and formed upon the turmoil and changes,
which frequently goes in global market, comprising many Political,
Economic and other factors as well.
Considering supply side of Car and Vehicle products, it can be said
that supply of these products are sufficiently good in market. There
are many companies, which are operational in large scale and
producing a range of cars for different types of economic and social
classes of people in society.

Elasticity of Demand and Supply
Elasticity of demand in the general context s understood as the
unit change in the demand of vehicles and car products, and unit
change happens in prices of oil. This phenomenon of economics
understand the behavior of changes in demand of one
commodity in relation to the prices of other commodity.
Therefore, looking at sentiments of supply, they become very
pessimistic and try to cut down their production. However,
suppliers of cars are also having very good knowledge of
fluctuations in prices of oil that happens at global level, and they
know that any increase or decrease in prices of oil do not remain
for too long, and that is bound to change after a given period.

Continued…
Looking at the other way, when a unit drop happens in prices
of oil, it can has been seen that the obvious rise in demand of
cars is not seen that great when prices of oil falls. This is
because, with unit decrease in prices of oil can be responsive in
affordable travel for consumers, but it does not guarantee that
cars will also become cheaper for buyers.
Similarly, for the suppliers and manufacturers of cars, decrease
in oil prices will be bringing down their cost of production and
thus prices of cars and the supply for the same remains in that
range only.

Effects of Substitutes and Complements
While, due to lowering down of oil prices, the overall sale of
automobiles or cars can be seen increasing, especially in
developed countries like United Kingdom and United States, it
has been also witnesses as a new trend in the market that, as
the fuel for vehicles and cars, gas-guzzlers are increasingly
emerging, consumers are shifting their dependence to new fuel
choices in the market (Olabi, Wilberforce and Abdelkareem,
2021).

Continued…
Gas-Guzzlers are increasingly becoming substitute of petroleum,
diesel and other traditional fuels for vehicles. While, on the
other hand, market of Electric cars are also very active.
However, this market is very new and so far has attracted any
few major players like Tesla. But, undoubtedly this can be seen
as the pioneer of future trend. The statements in this regard can
be made in concrete manner because environmental and
climate issues at global level demand future generations to be
lesser dependent on fossil fuels and non-renewable sources of
energy.

Conclusion
From the above discussion it can be concluded that, the oil
industry and the mechanisms that work in this industry forming
the base of it, are really complex. Also, players that are
involved in this industry are falling influential at global scale
and the manner of their functioning also makes its market very
complex. However, looking at nature of market of automotive
industry is as simple, but the role of oil industry bring little
fractures in its simplicity. Natural laws of supply and demand
come in to play, as with any free-market, but each is impacted
by the components that make up the oil industry, such as
refining capability, oil reserves, and foreign affairs.

References
Held, M., Weidmanna and et.al., 2018. Current challenges for
sustainable product development in the German automotive
sector: A survey based status assessment. Journal of cleaner
production. 195. pp.869-889.
Olabi, A. G., Wilberforce, T. and Abdelkareem, M. A., 2021.
Fuel cell application in the automotive industry and future
perspective. Energy. 214. p.118955.