The Future of Oil Prices - Assignment Example

The discussion then shifts to the US perspective wherein the price of the oil is determined to a great extent by the Americans. Nearly 25% of the world oil supplies are consumed by the USA. The article concludes by stating that the price of crude oil may go up to $200 per barrel in the coming years. The demand in the output markets is determined by the households from the above diagram. A household's decision about what quantity of a particular product depends upon the following factors and all the factors are getting affected due to the price hike.

Other products include substitutes (Solar power, Electric Battery, Wind power, etc.) and complementary goods (Cars and Automobiles, etc.). Due to this price rise, the prices of these substitutes and complementary goods will remain affected. Substitutes, a favorable condition exists and for complementary goods, the condition worsens. As per this graph, the pricing of oil is having an impact on producers and consumers. The producers/suppliers price the oil as per the law of supply in the early 2000s where the oil market was a buyers market.

The basis of pricing was the cost of production of the least efficient marginal supplier. It is the amount left after a household sells off all its possessions and pays off all its debts. 4. The Prices of other products available in the market Other products include substitutes (Solar power, Electric Battery, Wind power, etc.) and complementary goods (Cars and Automobiles, etc.). Due to this price rise, the prices of these substitutes and complementary goods will remain affected. Substitutes, a favorable condition exists and for complementary goods, the condition worsens. 5. The households' tastes and preferences will change.