Macroeconomic Outlook for Oil Prices Owing to Unrest in the Middle Essay

Macroeconomic Outlook for Oil Prices Owing to Unrest in the Middle East - Essay Example So if for example, we choose to use oil as source of energy instead of thermal or wind, we are trading off thermal or wind for oil as source of energy. Economics is also about cost and benefit analysis. This is because when we try to solve our economic problems and make choices, we look at it through economic perspective by comparing the costs and benefits of our choices. By using oil for energy source means that its costs and benefits are favorable over the other alternatives, thermal and wind sources. B. Market, Demand and Supply Just like any good in the market, oil demand and supply are affected by several factors in the market. Any change in its demand and supply will affect its price and its impact will be felt by the whole economy as well. 1. Market Market is simply a mechanism or arrangement which brings buyers or demanders and sellers or suppliers of a good or service into contact with one another (McConnell and Brue 2002, 49). In this article, we will be analyzing the oil m arket, meaning the mechanism or arrangement where the exchange happens between the buyers and sellers of oil. Buyers or demanders are the ones who are willing and able to exchange their money for oil. On the other hand, sellers or suppliers are those who are willing and able to exchange their product which is oil for money. 2.Demand The report cited that the EIA forecasted demand for oil is usually in the middle of OPEC and EIA demand outlooks. Demand refers to the quantities of a specific good or service that people are willing to purchase at any given price during a specified time period, given other things being constant (Miller 2004, 99). When taken singly, it is referred to as the... This essay presents a comprehensive analysis of the factors, determining the oil price and its volumes of deliveries against the background of worsening political situation in the Middle East. Market is simply a mechanism or arrangement which brings buyers or demanders and sellers or suppliers of a good or service into contact with one another. Demand refers to the quantities of a specific good or service that people are willing to purchase at any given price during a specified time period, given other things being constant. Supply is the amount of a particular good or service a seller or supplier is willing and able to produce and make available for sale at specific price and time. The total of all the supply available in a market will be the market supply Prices affect market demand and supply but there are other factors present in the market that can cause changes and can determine market demand and supply. The surplus in oil stocks was forecasted because the demand is at slower rate than the production. So, if the oil suppliers will continue producing oil at the same rate as before, they will be producing more than what the oil demanders are willing to buy from them. This situation will result to a surplus of oil in the market. To at least decrease the amount of surplus and bring the production near to equilibrium, OPEC members agreed to cut their supply by setting output quotas. The expectations about the future economic condition cause consumers to cut their spendings.