DEMAND AND SUPPLY

Demand and Supply

Demand and Supply

What are three factors that might explain why oil prices are high?

Demand for the series, in real terms deflated series with the WTI price index consumer U.S. The global fuel demand is growing at a faster pace in recent years. In 2003, the demand for fuel grew by 2.2% (1.7 mbpd5) to 78.9 “mbpd”, in 2004, there was a growth of 3.2% (2.5 “mbpd”) and just this year 2005 positions equal to 2003. The main factors influencing this behavior can be summarized in a higher economic growth worldwide and the change in the structure of fuel consumption of the main consumers of fuel in the world.

World Economic Growth

One of the most key factors is contributing to increased global fuel demand is the high economic growth of major economies in the world. Japan is emerging from a recession that lasted over a decade and the U.S. is emerging from a short recession supported by policies implemented monetary, and fiscal (low-interest rates to historic lows, and reducing taxes on dividends mainly).

China is one of the economies has been growing at a sustained rate quite high in recent years due to the level of their investments and the significant growth of domestic demand, while Europe has begun a gradual recovery this year after a deadlock the previous two years.

This growth is reflected in the higher world fuel consumption. The main consumer countries are the U.S. in 2004 with 25% of world consumption, European countries with 19.4%, Japan and China with 7.1% and 7% respectively. China is expected to continue to have significant growth in demand for fuel (14.5%) therefore, their participation in global consumption of this commodity.

Fuel Demand in China

China's economy is one of the engines of world economic growth of recent years. The high growth is increasing the fuel at high rates, particularly in the development industry, the transport and the generation of electricity from China. It should be noted that the transfer of part of the world's advanced countries to China and in general towards emerging countries, generates a higher global fuel consumption due to less efficient use of fuel by the use of less-developed technologies (Kunstler, 2005).

U.S. fuel demand

The U.S. is one of the biggest drivers of growth in global demand for fuel products of their high rate of economic growth and structural change in their consumption of fuel from the attacks of September 11 emphasized the fact that higher consumption of fuel for automobiles. In 2003, oil demand grew by 1.5% while the expected demand for 2004 and 2005 is 2.4% and 1.1% respectively.

Other factors that might explain why oil prices are high

Low Reserve

Another factor that is pushing up the price of oil is the low level of the stock of reserves in major consuming countries of the OECD, primarily in the U.S. The current level of stocks of all petroleum fuels in the OECD amounted to 3 960 million barrels, up from lows of 80 years. However, considering the current consumption level per day, this volume is only ...