what determines the crude oil demand and supply?

what determines the crude oil demand and supply?

4 Responses to “what determines the crude oil demand and supply?”

  1. conacre Says:

    Folks around the world see these things and think, "I want." Some decades later, China is working up an industrial revolution, India is working up a tech revolution, and the demand for oil about doubles. Part of the reason is that China was producing its own oil, but those wells have begun to dry up, bringing China into the world oil market where it was not before. That, alone, is much of the reason for the increase in prices. China was not about to halt its industrial revolution merely because the oil used was no longer communist oil. But then, some smart nut in India invents a little two-stroke vehicle that can transport a whole family, if needed, and now India is entering the world oil market, also. Meanwhile, back at the ranch, the supply in China is dropping (as noted), and anyone who’s thinking expects the same to happen to Saudi Arabia, Iraq, etc. It already happened in Abu Dhabi, which is why they are building hotels instead.
    There is one theory that oil isn’t a one-off thing but a renewed resource deep in the arcane rules of geology, but even that is irrelevant: it won’t renew that fast.

  2. Sean Says:

    How much oil is dug up and how much people are burning it. Isn’t that a little obvious? =)

  3. prinzharold Says:

    Crude oil demand has always been higher. Here’s the equation:

    If the DEMAND is HIGH and SUPPLY is LOW, the PRICE is HIGH.
    If the DEMAND is HIGH and SUPPLY is HIGH, PRICE is relatively FAIR.
    if the DEMAND is LOW and SUPPLY is LOW, PRICE is LOW.
    If the DEMAND is LOW and SUPPLY is HIGH, PRICE is LOW

  4. electret Says:

    To use 2007 as an example, US consumption averaged 20.68 million barrels per day. That sounds like a lot, and it is. However, global consumption averaged 85.9 million barrels per day. In other words, US consumption of crude oil was a little less than one quarter of the total. Which means that Americans are only a small part of the picture.

    Demand is how much oil people want to use. It’s similar to consumption, except for those who wanted to consume but were unable to buy as much as they wanted. As the US Department of Energy’s short-term projection says:

    World oil consumption is projected to fall by 1.2 million barrels per day (bbl/d) in 2009, representing an additional decline of 400,000 bbl/d from last month’s Outlook. World oil consumption is expected to rebound in 2010, growing by more than 1.2 million bbl/d, due to an expected recovery in the global economy. Oil consumption growth over the next 2 years is concentrated in countries outside of the Organization for Economic Cooperation and Development (OECD), particularly China, the Middle East, and Latin America, offsetting projected declines in OECD oil consumption (World Oil Consumption). If the world economy recovers sooner than EIA now anticipates, oil consumption could be higher than expected, putting upward pressure on oil prices.

    You might think of OECD as the "developed world," and be pretty close to the official definition. Also notice that demand drops by 1.4%, and the price drops to less than a third; this is what happens when demand is very, very close to supply. And world demand exceed world supply from 2006 until the second quarter of 2008.

    Supply is how much oil people are producing. It includes everything from Saudi gushers to Canadians steam-cleaning oily sand. People talk about OPEC a lot, and for good reason: When crude oil was over $130 a barrel and everyone was pumping it as fast as they could, OPEC supplied 43.5% of the world’s production. The former USSR nations (mostly Russia) supplied another 14.7%, while the US only produced 9.6%.

    Since then, OPEC has cut production as prices dropped; this is why the price of gas at the pump didn’t go all the way back down to $1.50/gallon. (Most places in the US, anyway.) While everyone else who has oil is expected to increase production in 2009, that production cut was nearly seven times as large as everyone else’s expected increase. Since OPEC has the ability to produce almost half the world’s oil supply, their cuts make a bigger difference to the price than everyone else’s increases. They meet again on March 15, and are expected to cut production still more.