Oil & Gas Supply

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Oil & Gas Supply

Introduction

Gas and oil are one of the most important and crucial raw materials in this world. We consume both oil and gas daily in our day to day life. They are considered as one of the primary source of energy, and without their proper consumption and supply, many individuals will suffer and many economies can fail. We need these raw materials in order to cook food, travel from one place to another and in everyday basic technological necessities.

However, the following pages will focus on what is a monopoly and oligopoly, and how these concepts of economics effects the gas and oil supply in the world and how can both of them bring economic benefits if these concepts are properly used and applied on the oil and gas supply around the world or country (Buck, 1980, p.190).

Furthermore, one of the main the concept in economics, “the concept of elasticity” will also be discussed with detailed explanation and its application in the oil and gas supply markets with appropriate diagrams and graphs if necessary (Deffeyes, 2005, p.67).

Discussion

Monopoly and its economic benefits in the oil and gas supply market:

In order to understand the meaning and effects of monopoly, it is crucial that the concept of a perfect competition in the market or industry is well understood as it is the basic concept that collides and gives meaning to the concept of monopoly. A perfect competition is a term used in the economics when there are multiple buyers and sellers in the market or industry. With many supplier and consumers of the same product or service in the market, prices are not supernatural as no one company is ruling over the market or industry and so every company has to accept the market price of the product as determined by its market supply and demand. (tutor2u.net/)

The concept of monopoly however, is somewhat opposite to the concept of a perfect competition in the market. Monopoly means that there is only one supplier of the product or service in the market with many consumers. It could be a geographical area, whole country or even whole of the world. Most monopolies fall into two main categories namely natural and legal. Where natural monopoly deals with public consumables and utilities like electricity, oil and gas supply, and legal utilities deals with companies receiving patients for exclusively using or producing products and services for a limited time like, 10 to 20 years or may be more. In order to comply with the requirements given, the focus of these pages will be on the role of gas and oil in a monopoly or in simple words natural monopoly (Deffeyes, 2005, p.67) As discussed above, oil and gas are the most crucial and primary source of energy in the world. With its extreme level of demands, many countries can achieve tremendous economic benefits if these basic resources are monopolised. Currently United States is considered as one of the main producer, researcher ...