How supply and demand plays in the rising of oil price ?

Oil price is rising obviously is rising, and it is caused by the demand and supply, with demand exceeds the supply.
So, what are actually the factors of these supply and demand…
OPEC come into mine as the supplier and China & India's rapid economic growth also come to my mine as the cause of demand.

Can anyone explain me more about this supply and demand factors that causes the oil price to increase this much?

4 Responses to “How supply and demand plays in the rising of oil price ?”

  1. heeltap Says:

    OPEC is a cartel and it operates in ways that milk bad situations. They have no incentive to supply more volumes of crude oil to the market since the obscene amounts of money they now make are way beyond their present and future needs. The oil markets are not "free markets" and you and too many who buy into the classic market model to understand the price behavior, refuse to learn that. People who spoof conspiracy theories need to understand the origin of our anti-trust laws which have been tossed out to favor overconcentration of power in certain commodities particularily in staples that tend to be highly inelastic on the demand side.

    Google "price fixing behaviors", "Anti-trust behaviors" "OPEC & commodity cartels". If you don't study up on economic history you are welcome to continue believing in the fantasy of "free markets." There are bad people out there with the power to milk us like cows or sheep!

    As long as you believe in the academic ideal model, you will be victimized over and over again! Now we are looking at a food crisis and price inflation in everything . Do you really think in terms of the classic free market models you learned in school and have been conditioned to trust to explain the economic realities of the real world! I don't anymore!

  2. John M Says:

    The demand for oil is rising, and is quite inelastic with respect to price in the short run. That means that people become committed to oil for transportation, heating, and production of energy for running plants etc. It is not easy or cheap to convert to other sources of energy since there is an elaborate infrastructure in place to deliver oil based energy around the world.

    So, on the demand side you have the rapid growth in consumption and the difficulty in switching to alternate sources.

    On the supply side, you have a cartel controlling a huge portion of the supply. This cartel is able to control the pace of supply enough to cause price increases to their own benefit as well as the benefit of other producers. These are intelligent people, who make rational decisions based on short and long term needs and strategies. So its foolish to think that they will do anything other than maximize their position. That does not mean that all they care about is short term profit. They understand that if the price goes too high, they will create powerful incentives for research and development investment in alternative sources, and investment in the infrastructure needed to deliver the alternative sources to the market. So they keep the volume pumping just fast enough to discourage serious investments of that type.

    The third factor that is widely acknowledged right now is a speculative element due to the decline of the dollar. If Americans elect politicians who will pay more attention to the budget deficit, and get our financial house back in order, you can look for the dollar to rebound a bit and the speculators to move on to other opportunities. this would ease the price of oil, perhaps as much as $40 a barrel when all is said and done. But at the same time, rising demand can push the equilibrium price of oil higher, so don't look for a real price decline of $40, that's just the estimated effect of speculation at the moment.

  3. libertarian85308 Says:

    The government has printed too many dollars so it is losing value. And the military is using lots of oil in the two war fronts. And Iraq is producing less oil after the invasion than before. This is all good for oil company owners and their supporters but bad for the common man.

  4. GLOBAL UPBEAT Says:

    We fall prey to OPEC as the nation is addicted to foreign oil. Brazil's PetroBras has freed Brazil from importing foreign oil due to their success in Ethanol project.

    The most important immediate remedy is to lessen our use of foreign oil. Less traveling and less electrical consumption will break our demand for gas.

    Our Govt. can lead our nation into zero foreign oil import by the propagation and acceleration of ALTERNATIVE SOURCES of ENERGY.

    This is the time when great leaders shine. In times of great need. I call upon the nation's leaders to step to the plate and kick GREED BACK INTO DARKNESS.

    OPEC 's GREED for power and influence is too much for the world to bear. If this was in the 40's, America would have taken over their oil.

    I would have exercised presidential prerogatives to expropriate and tap oil on the outskirts of the Arabian peninsula. Build offshore platforms and protect it with our sea power.

    Number #1's post has a good read on the situation.