Rising Oil Demand

According to Faucon (par. 2), oil prices have been on the increase and the situation is expected to worse in the second half of 2012 with the increasing demand. The main competing markets for this product as analyzed in the article are those from Asia, Europe and in the United States. With decline in supplies from other oil producers like Sudan, Nigeria and Yemen, the effect on the prices is likely to take a huge turn according to the Energy Information Administration of the United States, the global consumption of liquid and oil fuels must increase by almost 1.3 million barrels each day by the time the third quarter reaches. However, there will be a decline in supply of about 310,000 barrels each single day by this time.

This article relates to the topic on Supply and Demand price Determination in competitive Markets that we covered this semester. The number of producers in the market affects the supply in the sense that a decline in producers and producer levels will decline the supply. A declining supply while the demand is high translates to increased prices for the oil product as highlighted by Faucon. A severe decline in supply as anticipated in the second half of 2012 will see increased trade barriers amongst the competing markets. The article by Faucon is essentially about the changing oil supply and demand that is feared to cause price increment for the same product.      

Oil has been on high demand across the globe. Owing to this state of demand, the buyers will always be willing to pay these elevated prices for oil in order to compete favorably with the rest who still want the same product. The sellers undoubtedly are more than willing to oblige with the increasing prices. The scenario presented in this article shows very many buyers and sellers in which case, none of them on their own influence the oil prices in the market. This essentially demonstrates how supply and demand determines price in competitive Markets.

Looking at the situation highlighted in this article, I personally believe that prices of goods and services in the market will increase. With rising fuel prices, transportation cost of goods and costs incurred in the transfer and delivery of services will escalate. Generally, life will become hard for the consumer. Therefore, general consumer spending will be reduced proportionally the same.    

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