Demand For Oil
This section reviews the rising demand for oil and the ways we use petroleum. It also throws light on the effect of demand for oil on the oil markets.
The global oil demand remains one of the most influential factors in oil-market behavior. However, any drastic changes in oil price do not necessarily induce any changes in oil demand. According the expert energy analysts, prices can fall a long way without stimulating oil demand whereas, lessening demand does have an impact on price.
But the continuing increase in oil consumption by developing countries along with the high demand from the United States, mean that oil demand is not likely to ease in the near future. A major reason why the oil market is not very competitive like other markets is that they do not entirely act like other commodities markets.
The industrialized countries are the largest consumers of oil. It is seen that the developed economies use oil much more intensively than the developing economies, for example- USA and Canada are the major consumers of oil. Asia and Europe follow closely in their demand for oil.
The reason behind the oil demand also differs, for example, in USA, oil is mainly used for transportation whereas the rest of the world uses oil for heat and power. As a result, global demand for oil is highest in the Northern Hemisphere's cold months. It is quite difficult for public and private analysts to measure the oil consumption. The size and complexity of the market coupled with the number of consumers and suppliers make it a daunting task. A variety of complex surveys to examine oil consumption have been undertaken, but these surveys are costly and time-consuming.
According to the energy analysts, the oil market being so volatile is the main reason for not being truly competitive like other markets. Even if the market has enough supply, the cause for rising prices is put solely on oil-market investors. But some experts argue that market unpredictability is not the fault of investors entirely. According to them, oil analysis has become redundant and has not adapted to the fact that the oil market now behaves more like other financial markets with prevailing supply and demand factors.
If the global demand for oil keeps pushing the prices up, and plus with the limited oil production, then the oil prices are going to remain at much higher prices for a much longer period time than ever before.
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