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OIL GLUT
Factors that Affect the Demand and Supply for Crude Oil
Oil is one of the most crucial sources of energy in most countries in the world. The world economy relies greatly on the oil prices. The oil prices have been fluctuating over the past years. This can be attributed to two different factors in the oil market structure. One of these factors is the demand and supply for oil and oil products. The demand and supply concept dictates that as the demand for a particular product increases, it directly affects its supply. In this case an increase in the demand for crude oil will lead to the decrease in the supply of crude oil. All these factors directly affect the oil prices.
The market sentiment plays a critical role in setting global oil prices. An anticipation of oil shortages may lead to the increase of oil prices. High demand for oil will cause the suppliers to raise the oil prices. The geopolitical factors play a major role in determining the global oil prices. Most of the oil producing countries is affected by political upheaval. This is the key reason the oil prices are not stable. The current oil glut has been caused the increasing oil surplus in the market. This is pushing the key members of OPEC out of market (Cunningham).
Conclusion
The rate at which the oil surplus has affected the prices has numerous effects on the global economy. Most of the oil producing countries has sort of using several strategies to create oil price stability. The OPEC members need to control the rate at which oil is allowed into the market. They should also come up with better ideas to reduce oil glut and prevent the future occurrence of the same (Cunningham).
Work Cited
Cunningham, Nick. 'Top Five Factors Affecting Oil Prices In 2015 | Oilprice.Com'. OilPrice.com. N.p., 2015. Web. 14 Oct. 2015.