Crude Oil Market and the Law of Supply
Code : ECC0061 |
Region : Global |
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Global Oil Market: In conventional oil production, crude oil and natural gas flowed to and up a well under the natural pressure of the earth. Saudi Arabia was the top in conventional production followed by Iran, Iraq, Russia, Kuwait, and the UAE.. The Impact of Oil Production on Oil Price: The global demand for oil had been growing, overtaking any increases in oil production and surplus capacity. Analysts felt that developing nations, especially China and India, had been growing rapidly in terms of industrialization and urbanization.. Indian Oil Market: In 2019, India was the third largest oil consuming nation in the world after the United States and People’s Republic of China (PRC). But the domestic production of oil was only around 15% of the total demand. India’s estimated crude oil reserves were approximately 620 million tons.. Oil Supply in India: The production of oil in India was not sufficient to meet demand. Around 85% of the demand for oil in India was covered through imports. The gross petroleum imports of about 239 million tonnes (MT) valued at US$77 billion accounted for over 19 per cent of India’s total imports in 2020-21 whereas it was 270 million tonnes of the value of US$ 119 billion with 25% of total imports in 2019-20.. Relationship Between Quantity of Oil Supplied and Price: While factors like the cost of extraction of oil, government policies like subsidies and taxes on oil production, agreements among oil producing countries, etc. were constant, there was a positive correlation between the price of oil and the quantity supplied.. Exhibits: |
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