Oil Demand and Supply

Demand is amount of a particular economic good or service that a consumer will want to purchase at a given price. The demand of oil is related to the total oil quantity, market price and some specific time period. Many different factors can determined the demand of good or services, such as the price of substitute goods and complementary. A basic characteristic of demand is: there is a negative or inverse relationship between price and quantity demand. When the price of oil increase it will lead to demand falls. When the oil price decrease the demand will increase.The determinants of demand include: preferences or tastes for the product. The number of buyers in the market, the income, price of complementary and substitute products, expectation of consumers regarding future price and income. Energy demand is distributed amongst four broad sectors: industrial transportation, residential, commercial.

The development of industry of ongoing countries such as China, India, and Middle East require more oil consumption. For example, oil demand of China increasing rapidly (Holscher & Bachan). It has raised by 411 percent during the 30 years to 2003. The oil producing capabilities of china cannot catch up with the demand they satisfied. So it will demand of oil in developing countries kep increasing it will influencing international oil price.

In terms of oil consumption, transportation is the largest sector and also be the largest growth of demand that has seen in recent decades. As the need of shipping goods, airplane and increasing number of vehicle, the overall demand for oil used of transport continues to growth. If oil supply from OPEC countries does not change and the demand of oil keep rise. The international oil rice will increase.

Global Financial Crisis is a significant demand factor which can influence international oil price. During the Global Financial Crisis, when the supply does not change, because of lack of money the companies will