Petroleum Price Analysis
ARTICLE TITLE: FACTORS THAT DRIVE PRICEY OF PETROLEUM
In Malaysia, RON 95 and RON 97 petrol has increased prices from years to years. Not only in Malaysia, but all the countries in the world are facing same trouble, petroleum prices keep increase until it become a economics burden for community. Petroleum prices $36.7 per litre in 1983. In 2005, it has increased to $79.9 per litre and last year, it also has increased to $134.1 per litre. So, what are the factors affecting the prices?
First, we found out that the greatest single factor influencing petroleum prices is crude oil.
So, we have analysis crude oil's demand and supply situation at below.
Diagram 1
Demand and Supply for Crude Oil
Diagram 1 show the supply curve for crude oil, shift from S0 to S1. At the same time, demand curve for crude oil also shift from D0 to D1. As a result, there is an increase in the equilibrium price level ( from P0 to P1 ) and undetermined in equilibrium quantity for crude oil. The reason for crude oil price to increase is due to shortage of crude oil. There is some reasons which drive the crude oil price rises.
Limited spare oil production capacity has driven crude oil price rises dramatically. There only few countries remain reserves in the Middle East which are Saudi Arabia, Iraq, United Arab Emirates, Kuwait and Iran, North Sea and Brazil which recently discovered a new field with an estimated 5-8 billion barrels but such major discoveries are rare.
The situation above occurred also driven by strong global demand. Since the world population has grown tremendously over the past two thousand years, and, by 2054, the population is predicted will be double from current. As the extremely population growth, in a short run, demand from consumer for crude oil also increase excessively, for variety usage such as fuel.
Diagram 2
Demand and Supply for Petroleum
Diagram 2 shows that supply curve for petroleum,
In Malaysia, RON 95 and RON 97 petrol has increased prices from years to years. Not only in Malaysia, but all the countries in the world are facing same trouble, petroleum prices keep increase until it become a economics burden for community. Petroleum prices $36.7 per litre in 1983. In 2005, it has increased to $79.9 per litre and last year, it also has increased to $134.1 per litre. So, what are the factors affecting the prices?
First, we found out that the greatest single factor influencing petroleum prices is crude oil.
So, we have analysis crude oil's demand and supply situation at below.
Diagram 1
Demand and Supply for Crude Oil
Diagram 1 show the supply curve for crude oil, shift from S0 to S1. At the same time, demand curve for crude oil also shift from D0 to D1. As a result, there is an increase in the equilibrium price level ( from P0 to P1 ) and undetermined in equilibrium quantity for crude oil. The reason for crude oil price to increase is due to shortage of crude oil. There is some reasons which drive the crude oil price rises.
Limited spare oil production capacity has driven crude oil price rises dramatically. There only few countries remain reserves in the Middle East which are Saudi Arabia, Iraq, United Arab Emirates, Kuwait and Iran, North Sea and Brazil which recently discovered a new field with an estimated 5-8 billion barrels but such major discoveries are rare.
The situation above occurred also driven by strong global demand. Since the world population has grown tremendously over the past two thousand years, and, by 2054, the population is predicted will be double from current. As the extremely population growth, in a short run, demand from consumer for crude oil also increase excessively, for variety usage such as fuel.
Diagram 2
Demand and Supply for Petroleum
Diagram 2 shows that supply curve for petroleum,