In case the price of oil went down, then the price of such commodities were also stable, and if the price of this commodities went down, then these products also follows such occurrences. If we are to analyze this, one might ask, what is with oil that it has the power to control different scenario
On the second thought, analysts particularly economists suggests that it is not only the oil that can have such a trend, but almost every product that is available to the market. This kind of occurrences is dictated by the demand of the customers and the availability of the product. In this case, the law if supply and demand comes into picture. Therefore, what is the law of supply and demand Before analyzing such a law let us first scrutinize the meaning of demand and supply with regards to economics perspective.
The Columbia encyclopaedia (2005) described supply and demand as, 'Supply refers to the varying amounts of a good that producers will supply at different prices; in general, and a higher price yields a greater supply. Demand refers to the quantity of a good that is demanded by consumers at any given price. According to the law of demand, demand decreases as the price rises.' Upon analyzing this premise we can now have a clearer picture of what supply and demand has something to do with the oil market. It is now clear that oil will be regarded as the supply and the wanting of the consumers to get the oil to compensate their needs is the demand. Upon looking into this scenario, one might conclude that the oil as a commodity has the power to dictate its price regarding to the demand of world market.
As stated on the first page that almost every human activities on earth needs the consumption of oil, therefore, it would be safe to conclude that there is a huge amount of demand for oil. From cooking meals, generating electricity and running automobiles, this kind of activities consumes oil. If we are to base such things with the aforementioned premises, the price of oils would tend to go up and it is due to the law of demand. The law of demand is defined as " a microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa (answers.com 2006)."
In this regard, the flow of the prices of oil would tend to go up if we are to base this phenomenon to the worldwide demand of oil. All over the world, oil is a necessity in life. On the second thought, one might ask that why it is that oil can dictate the flow of economics of some countries in the world Why is it expensive than other necessities The answer would be, it is because of the availability of the product.
If we are to compare oil's prices in the majority of Middle East countries where oil is abundant against distant countries such as the Philippines where there is a minimal source of the said product, there is a huge amount of difference with regards to the amount of oil. In countries such as Saudi Arabia, UAE, Kuwait and the likes, oil prices ranges from $20-$30 centavos per liter to judge against $1.2 per liter. This is due to the following reasons: 1) the fact that oil production is limited, then the priorities of the distribution of oil would be in the countries were it was extracted and therefore, counties