Oil Prices

The demand for oil depends on price of oil. It has been increasing because of income, population, price of oil and the technology. These factors will change the demand of oil. When income raises the demand of oil rise, so people more likely to travel, use more electrical products and use more heating & air conditioning etc. However when price of the oil rises and the income stay stable, it will affect the amount of income left over to be spend on other goods. The demand of oil will decrease because people cannot afford to buy other goods.

As the price of oil rises, the demand of oil fall and demand curve will shift right because people prefers lower price and greater quality. Population is a main factors which increase in oil demand because more people means more demand for fuel, energy, plastics and food, this all highly demand on oil. Oil demand rises in developing country than developed country because of economic growth in China and India by manufacturing clothes, toys, electronics and other good, this all highly depend on oil. Technology would raise the demand of oil, for example oil have been used for manufacturing new line technology. The increase in the price of oil is likely to affect the demand for oil in the short terms so when oil price rises, the real income will decrease. For example, people will not able to afford a long journeys, heating and air conditioning and fewer products made from oil will be buy or manufacture. The oil prices is so major, it may affect the economy as an entire, for example the oil prices rises in 1970s were one of the factors leading to recession and slow growth, and this reduced the demand for oil. However in long terms, the demand of oil will decrease and switch to alternative sources of energy. The substitution of oil is natural gas, coal and renewable, wind and solar power. "Even in transport bio-fuels could be used and people could use public transport, walk or cycle. Switching to alternative energy sources is going to take time, for conversion or the construction of new power stations, building windmills and installing solar energy."