These conditions are there for every market. The demand and supply help determine the price and the quantity of oil that should be supplied to the world. The major contributor to oil supply in the world is Saudi Arabia.
The market in the UK is said to be self sufficient till 2016. The industry produces around two million barrels of hydrocarbons per day. Even though the country is self sufficient, the oil reserves are declining. According to the article 'Oil, gas and petroleum: Overview,' (2006) the oil reserves are mainly in the North Sea and off the coasts of Aberdeen, Suffolk, Norfolk, Liverpool and Morecambe Bay.
UK is known for its ability to extract oil in larger quantity from the deep sea by using advanced engineering techniques. UK exports oil in its raw form. The country is now focusing of making full use of the existing oil fields instead of looking for new smaller fields.
The Oil, gas and petroleum: Overview article (2006) provides us with the following figures, the petroleum industry by itself exists of 200 companies who perform different processes including, refining, distribution and marketing. The basic structure of the market is based on two divisions, retail and commercial. The retail side of the structure includes petrol sold from filling stations while the commercial side includes the government and its agencies, industrial and agricultural transporters, power generators etc.
The petroleum industry gives way to thousands of jobs to contractual workers and on a full time basis employs, 150,000 people. According to the Staff Report to the Federal Trade Commission, the industry is controlled by seven companies, five of them are American and the other two are British-Dutch. The American companies are: Standard Oil Co. (New Jersey), Standard Oil Co. of California, Socony-Vacuum Oil Co., Inc., Gulf Oil Corp., and The Texas Co. and two British-Dutch companies are: Anglo-Iranian Oil Co., Ltd., and the Royal Dutch-Shell group.
The ownership of the companies or the control is not kept through the direct way only but also through indirect means. Companies trade with each other as they all perform different operations. The joint operations or interconnections mainly exist because of the joint pipelines owned by these companies. Sharing of pipelines makes it cost effective as installing pipelines for every company would incur huge amounts of costs.
Environmental concerns have arisen in the pat few years as people have realised that burning of the fossil fuel is causing pollution.
According to Elitza Mileva (2007), 'the market works in the following way: higher-cost producers sell all they can produce, while low-cost producers satisfy the remainder of the demand at current prices and cut back production if needed.'
Recently we have seen high prices because there are no close substitutes for oil and people can not change over very quickly, thus the demand is insensitive to the price changes making the demand inelastic. The highest consumer, producer and importer of oil are the United States.
When oil is distributed it should go to the nearest location or geographical area because the cost of transporting the oil is very high, as mentioned earlier.
Some reasons given for the