Fundamentals of supply and demand are applicable in different real life situations. Many of these real life circumstances include the demand and supply of oil published in various news articles. The article I found on the actual instances of supply and demand correlates with the oil market in the United States (US) supply and demand situation. An increased oil supply in the market has affected oil prices in North America.
North America has had an oil supply escalation in recent years. Thus, there has been a decline in oil prices due to increased supply in the region. However, prices of other commodities have remained constant. This instance is described as a shift and movement along North America’s oil supply curve. Oil is a complementary good that must increase in price in the North Sea region relative to prices in North America. For this, an increase in oil prices alters the constant price of other goods to increase. (Townsley, 2022). Hence, the North Sea region oil curve demand will shift to the right. Therefore, there will be an increase in oil prices in the North Sea region.
Application of supply and demand basics to quantity demanded and oil prices show that oil price has increased by $2 per barrel in Midcontinent North America due to a rise in demand in June and July 2022. The addition of an oil supply of 250000 barrels by Magellan pipeline and 750000 by Southern leg keystone daily in the first quarter of 2022 caused a shift in the supply curve to the right (Townsley, 2022). Hence, the oil supply has increased daily by two barrels worldwide. For this reason, the US’s increase in oil supply directly impacts the world.
Generally, the determinants of supply and demand for oil in the market comprise increased usage of fuels in cars. Many individuals have gained higher preferences for private transport over public transport. This factor contributes to the high demand for oil, resulting in hiked oil prices. (Townsley, 2022). Further, hiked oil prices trigger prices of other commodities to rise in the market. The aspect of supply and demand in oil is demonstrated by the shift in the oil demand curve below.
Reference
Townsley, A. (2022). North America crude oil steps up with more supply. Open Markets.