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Final Paper - Today crude oil is one of the most...

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Today, crude oil is one of the most significant parts of everyday life. The world as we know it would not be the same without its existence. Crude oil affects everyone regardless of whether they are directly associated with it or not. The production of crude oil is without a doubt a huge part of the world economy, but despite its many benefits to the economy as a whole it has a never ending list of draw backs. Crude oil has become one of the most common types of petroleum products used in everyday life. It is commonly used in fuels such as ethane, diesel fuel, gasoline, jet fuel, kerosene, liquid petroleum gas (LPG) and numerous other types of derivatives. Because petroleum is a land resource it is more available in certain areas than others. The countries with the most proven oil reserves are Saudi Arabia, Canada, Iran, Iraq and Kuwait (Wikipedia). Obviously there is a large proportion of the total oil reserves located in the Middle East, which has caused many conflicts throughout history. One major economizing problem with crude oil is that it is a limited or scarce land resource. Because it is a scarce resource, it leads to an inconsistency in the production and consumption aspects of crude oil. As a society we have an unlimited amount of wants, but a limited amount of resources. This is part of society’s economizing problem, which means society must make choices under conditions of scarcity. Because there is not an abundant source of crude oil, it causes many problems among nations worldwide. It also causes society to develop alternatives to crude oil to deal with scarcity, which I will discuss later. I will first discuss the inconsistent and common changes in demand of crude oil. A demand is a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a
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specified period of time (Book). It is simply a statement of a buyer’s plans, or intentions, with respect to the purchase of the product. The law of demand states that as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls (Book). Based on articles that have been gathered throughout the semester, the price of crude oil changes frequently and inconsistently. Based on the law of demand, these changes in the price of crude oil lead to an equal number of changes in the quantity demanded by the consumer for crude oil. So far, I have discussed the effects of one consumer, but in a competitive market, like crude oil, there are numerous buyers and sellers. The changes in the demand curves of the individual oil firms cause shifts in the demand of oil. These demand shifts are caused by changes in the determinants of demand. The basic determinants of demand are (1) consumers’ tastes, (2) the number of buyers in the market, (3) consumers’ incomes, (4) the price of related goods and (5) consumer expectations (Book). Based of the articles gathered throughout the semester, changes in
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