The Demand for Oil: Academic Paper

The Demand for Oil

Part 1

Question 1. Oil is a commodity that we can hardly do without. We use it for heating, cooking, transport, and many other purposes. Its demand has been varying globally, leading to steady changes in the commodity’s prices. Two significant factors reviewed in Chapter 3 explain the recent changes in demand for crude oil. The exorbitant prices of substitute goods (renewable energy sources) have made consumers opt for hydrocarbons/oil (Urbi). An increase in income also explains the recently experienced upsurge in demand. Most countries globally are experiencing an economic expansion, which means that per capita income has increased, and, hence, the demand for oil (Urbi).

Question 2. The demand for oil is also influenced by several other factors, including price, number of buyers, and quality. Renewable energy sources, such as shale from the USA, are more expensive. Since consumers look for the most economically feasible option, they have opted for crude oil, which is much cheaper. With the proliferating growth of the global economy, the number of potential oil users has increased, which explains the recent increases in demand for oil products. Shale has been determined to have lower energy potential when compared to crude oil. This is a quality factor that has increased the oil demand internationally.

Question 3. If the price of oil increases, it is likely that the demand will decrease. The prices will obviously shoot when a government tax is introduced on crude oil. This will make the commodity unaffordable, and thus, its demand will decrease.

Part 2

A typical measure of GDP is likely to miss some production items, such as a country’s natural capital and ecosystem, and value-added by volunteer work since it only considers items that can be assigned a distinct monetary value. These missed items are the bedrock of all other economic variables that are included in the GDP computation, and hence, they are items that should concern us (Cha). Economists need to devise a way of including them in the computation of GDP. Meanwhile, the items in my backyard/window flower box should only be counted in the GDP if they have a monetary or economic value. This means I intend to trade them, so I have attached some prices to them.

Works Cited

Cha, Minjin. “What’s Missing From GDP?” Demos, 29 Jan. 2013, www.demos.org/publication/whats-missing-GDP. Accessed 13 Nov. 2018.

Urbi, Jaden. “Here’s What Drives the Price of Oil.” CNBC, 30 July 2018, www.cnbc.com/2018/05/15/what-drives-oil-prices.html. Accessed 13 Nov. 2018.