World Oil Supply Oil, one of the most precious commodities of the mechanized age, is available in limited quantities as it is an irreplaceable resource. Not only does oil run the United States and hundreds of other countries around the world, but it also is a vital element of the global economic system. Without the trade and drilling for oil, economic growth and prosperity would be an overbearing task. Crude oil prices as well as refined oil products are volatile and have risen by over 25% in 2004 alone and the latest rises are causing worries in importing countries about the economic cost of higher energy prices. Major oil exporters are divided between countries such as Saudi Arabia (the largest oil exporting country in the world) and Kuwait, who favor of lifting output in an attempt to ease price, and countries like Venezuela which argues against conciliatory moves toward big consumers (mainly the United States). From an economic vantage point, there are many factors that create price instability for the trading nations of oil. One cause of the rising price is the increasing (rightward shift) of demand in the oil market. Global economic expansion is driving the biggest increase in oil demand in 16 years. Blossoming economic powerhouses like China rapidly expand their economy and create a huge demand boom. US demand has increased as well because of strengthening economic recovery and the strengthened economy translates into a need for a higher grade of cure oil for the large numbers of Sport Utility Vehicles and other large cars and trucks. As a result of the increased demand, suppliers do not have enough significant reserves of oil to release and trade in the market. As a result, a shortage is created. The shortage forces consumers (countries) to pay a higher price while producers (exporting countries) demand a higher price in order to bring the oil on to the market. Oil is a highly inelastic good. This means that the…
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