Oil Demand and Supply Exploration

The global demand and supply of oil are affected by the economic stability of nations with oil reserves. During hard economic times such as wars and inflation, oil prices shift, and so does its supply. The world's economy has experienced volatility and instability, from wars to political reforms to inflations caused by natural calamities. Due to this, predicting oil prices using current and past figures is difficult. Economists should understand the various factors causing changes in demand and supply for oil, including factors that promote an equilibrium for oil supply, to explain the changes influencing oil prices which may enhance accurate predictions of oil demand and supply.

Oil demand and supply depend on market needs, supplier resources, and global economic factors. Oil demand only grows since the population increases, and so do oil needs for manufacturing plants' mass production and basic day-to-day needs by local households (Degiannakis, 2018). Over the years, the oil demand has changed since people continually understand the various ways it can be applied to production processes, including the separation between the uses of wet and dry gas (Degiannakis, 2018). Conventional and unconventional methods influence the cost incurred during extraction processes which may affect the demand and supply and influence the gas prices during different economic times since extraction companies experience various challenges (Penner, 2013). Sometimes, the contracted extractors do not engage in exhaustive processes but only extract as much as the population needs, creating an equilibrium between the demand for oil and its supply. Additionally, political factors such as instability and political instability affect the worldwide oil supply. The oil supply does not match the demand since powerful countries withhold these oil supplies (Degiannakis, 2018). Therefore, market needs, resources, the diligence of extractors, and global economic factors affected by political stability influence oil fluctuating prices.

Extraction methods, political changes, and economic stability has evolved to influence the oil supply and prices during specific seasons. For instance, conventional methods are the most preferred traditional methods for oil extraction, which are cheap and require relatively little expertise compared to unconventional oil extraction methods (Penner, 2013). In the U.S., Shale production has efficiently carried out unconventional gas and oil extraction methods. The problem, however, is the associated costs, which are higher than conventional extraction methods and influence the overall oil prices within the country (McKinsey & Company., 2020). Extraction methods have changed to reduce the time spent during the extraction process and maintain the temperatures for solvent oils (Penner, 2013). Political influences and biases are beyond extraction companies and solely depend on political decisions within specific countries. For instance, the most recent political instability affecting oil prices was the Russia-Ukraine war, which caused inflation in oil prices since the oil supply for many countries was limited. Using these factors to make future predictions, identifying new extraction methods may cause oil prices to increase, similar to an unstable political atmosphere. Therefore, newly discovered complex extraction methods have changed over time to influence oil prices.

Oil has been an unstable commodity in terms of price and the market demand and supply for oil products. Political instability and varying extraction procedures have affected oil prices and oil supply. These factors have changed since evolution is necessary for the extraction process, while political factors depend on economic conditions within a country or political choices.
 References

Degiannakis, S., & Filis, G. (2018). Forecasting oil prices: High-frequency financial data are indeed useful. Energy Economics, 76, 388-402. https://doi.org/10.1016/j.eneco.2018.10.026

McKinsey & Company. (2020). An operator's guide to transforming E&P. Oil & Gas Practice.

Penner, E. (2013). The Truth is Out There - Unconventional Production Economics. RBN Energy.