The cover color pains is a large and fast depleting industry. The of import commercialize crude producing countries and organizations such as Opec and Opec+, and a hardly a(prenominal) other non-Opec countries indicate that their current production rates (reserves) be slowly being eaten up. This is shown by (graph 1)
The structure of the world oil market is set to be oligopolistic as the oil market is dominated buy few suppliers, such as Opec and Opec + and the northwestward Sea. For a industry to be classified as an oligopolistic industry it has to have a few large firm which detain a truly large amount of output, also the firms must(prenominal) be interdependent, in addition the barriers to entry are very towering, because not every country can produce oil, and thus can not enter the oil market, and take returns of the abnormal profit.
Before 1970 the world oil market was at a steady position, as the demand was inelastic, indicating that there wasnt a high demand for oil, which means that the price for oil didnt change at a significant rate, actually the price of oil unload from approximately $1.70 a barrel in 1950 to $1.30 (Alain Anderton)
However after 1970 hatful realised that oil is a very efficient and audacious source of fuel, which than lead to the revolution, and demand became elastic and price for oil began to addition By 1973 the price of a barrel of oil had risen to approximately $3.
00 (Alain Anderton) As a result onward 1970 there was spendthrift supply for oil, but after 1970 their was excessive demand, which pressurised the middle east countries to produce more oil, which lead to increase the rate that oil was being consumed.
As Opec holds a 38% of oil market shares, they tend to have a lot...
This messes up catch - demand was always very inelastic in the misfortunate term, and gets less inelastic in the medium term. Talking around the price as it it moved steadily from 1.30 in 1970 to 28 now, without mentioning peaks and troughs, is crazy.
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