The Oil/Gas Industries

The Oil /Gas Industries

2007

Oil /Gas Industries

Introduction

Within the past one decade , the undulating energy price especially oil has significant influence towards the world 's economy . Nouriel Roubini (2006 ) carried out a study on the U .S . and global economy and found that in 2006 , there are some important issues that change the face of the world . One of them is about energy prices especially oil pricing . This makes sense since oil becomes key material that generates turbine power moves vehicles , live power plant and many others

Moreover

, according to one research , oil price has important influence in determining macro economy of a country . For example , the worlds recession in 1970s was one famous example to describe the impact of oil price to macro economy . Interestingly , while the increase of price of goods may be the result of supply and demands , in the case of the undulating oil price may be economic and political reasons

Furthermore , energy analysts suggest the changes in oil price should not be viewed as the results of independent factors . This is because historically many factors influence the alteration of oil prices . For example , the change of oil price in late 1990s was much political driven especially due to political events in the Middle East . In addition , the OPEC (Organization of the Petroleum Exporting Countries ) that held meeting in March 1999 is the responsible organization of the increasing oil price in March 2001

The situation suggests that changes of oil price may be caused by a cartel (OPEC ) decision to benefit the member countries that usually relies the countries ' income from oil production (OPEC , 2007

Concerning the issues exist in oil /gas industries , this will address four main issues they are how a current or past event in the industry has caused shifts with the price elasticity of supply and demand , any negative or positive externalities the industry produces how wage inequality is measured and if it is present in the industry and monetary and /or fiscal policies that have affected the industry

Event in Oil /Gas Industry and Its Impact on Price Elasticity of Supply and Demand

Amidst feud regarding the discussion over the way how oil prices influence the macro economy , many scholars and analysts agree that the major factor underlies the recession in the United States since 1972 was associated with major increase in oil price

Price Elasticity of Demand

By definition , Price Elasticity of Demand refers to a measurement of quantity demanded responsiveness . The price elasticity of demand can be explained by using following formula (Multimedia University , 2004 :The formula suggests that if price elasticity of demand is 3 , it means that if price of goods is increased from the prevailing level , the percentage change in quantity demanded will be 3 times the percentage change in price

Price Elasticity of Supply

In addition , Price Elasticity of Supply deals with the responsiveness of the quantity supplied of a good to a change in its price . The elasticity can be measured...