In the modern society, oil becomes the most important flue in many countries as it may be the most efficient flue that can provide energy. However, there are some problems from using of this energy. Firstly, this energy source is limited and can not be recycled. Secondly, there is some pollution caused by burning of the oil. Finally, there are some shortages with oil in many countries and the increasing demand of the oil make the price rise rapidly. The diagram below shows the world oil price in the past two year (Daily oil prices of NYMEX Light Sweet Crude, 2006).
Daily oil prices of NYMEX Light Sweet Crude, prepared from data at
From the diagram, we can find that the world oil price is rising over the past two years. The price reached to the peak of 77 dollars per Barrel in July 2006, almost doubled from the prices in January 2005 at 43 dollars per Barrel. Although the price of the oil was falling after the peak in July, this downward trend stopped at October, and started to rise in the recent months again. This essay will firstly discuss the law of demand and law of supply and then consider the elasticity of supply and demand, finally, analyse the world oil price in the next two years and after twenty years.
There are two main factors may affect price, the supply and the demand. This paragraph will talk about the supply situations of the oil in the recent years and then next paragraph deal with demand issues. In general the supply of oil is decreased. There are many issues that cause the reduction of the supply, for example, the Crisis between Israel and Lebanon and the Iraq War (Hofschire, 2006). Nevertheless the most important reason is from the suppliers themselves that is the controlling of price in OPEC countries. The latest news is that the OPEC countries decided to cut down oil production by 1 million barrel per day to fight against of the falling prices (John, 2006). Although world oil market is a competitive market, as the large...