Essay about a study case analysis of the OIL MARKET

About a study case analysis of the OIL MARKET - Essay Example As opposed to the rest of the world which uses oil more for heat and power, Canada and The United States use oil more for transportation providing a larger market. The Northern Hemisphere provides a larger market during cold months. Developing countries provide a substantial market size but the increasing debt is making them a less targeted market (Luciani 85). The relative price of oil substitutes such as gas also affects the demand for oil. The development of reliable and cheaper oil substitutes may cause a shift in demand away from crude oil towards the emerging substitutes. Research and development of non-oil substitutes has risen since the high oil prices during 2004-2005, even though this can take years to affect the energy market. These substitutes include renewable and alternative fuels like hydropower solar wind geothermal, biomass and ethanol. Related goods can also be compliments of oil or goods that utilize oil and oil products like vehicles. If the prices of vehicles rise then the demand for oil will fall and if the prices of vehicles fall then the demand of oil will rise. This shows that related goods can either be substitutes or complements. The amount of income a country is willing to spend also determines the demand for oil and oil products. If the consumer country has more disposable income then the demand for oil will be more but if the income remains constant and the oil price rises the demand falls. Similarly when oil prices fall the amount of oil demanded for the same income will rise. This means that a relatively higher income level consequently increases demand levels and a lower income translates into lower demand for oil. This explains why developed countries demand more oil than developing countries. The dependency on oil has led to many of the developing countries to pile a lot of debts in their quest to acquire oil (Pirayoff 76). Oil supply depends with its availability and it is believed