Oil Prices Increases

There are a few reasons oil prices increase, and they’re not all related to oil being traded in the United States. The main reason for this is oil being used as fuel, which brings about a substantial demand and supply of that product, and results in oil pricing increasing, especially if a large area of land becomes occupied by people who use it as fuel for their cars, trucks or other forms of vehicle transportation. This can be attributed to two primary causes: first, crude oil has become very expensive to produce, as it is often one-third the cost of producing oil itself, and in addition, labor costs have also risen significantly as a result of the rising global demand for them. Second, people who burn their own oil, because it is cheaper than buying fossil fuels at retail, are able to dictate how much oil to buy without paying higher price tags, even though many alternatives for fuel exist (such as renewable energy sources). In some cases, people simply prefer to burn more oil than natural gas, both of these things contribute to the high cost of oil production.

A lower rate of production means a lower rate of supply, which leads to higher prices. However, most experts agree that once the global economy recovers from its current slump, there will be less demand for oil due to the recovery. As such, we should expect supply of oil to fall, and any further upward trend would mean higher consumption and consequently lower revenue for OPEC, which in turn will lead to higher crude rates in the future. But, what’s interesting about the graph above is that even though supply and demand rise dramatically in response to rising consumer wages and rising incomes in most major economies, in countries such as China, India and Brazil where labor unions have been weakened, the graph shows that supply increases with no corresponding change in demand. If you look at the graph above, it makes sense that there is some sort of relationship between labor market conditions and rising prices, as labor has become increasingly costly in some parts of the world due to rapidly developing technology.

If you look at the graph above, you’ll see that demand for oil was always somewhat limited in developed and/or industrialized societies, as society generally allowed for the production of less stuff like coal or iron ore than needed, while those living in areas with less developed and/or less social systems were restricted to only producing what they had. This made sense, as the lack of products provided less economic activity required, and led to an overall lower level of income (which in turn meant lower wages) in areas with fewer resources. Nevertheless, due to technological advances in recent years, the distribution of commodities, and especially petroleum products, have greatly increased. Consumers therefore now want and need more rather than less, because they have more resources at their disposal. When this happens, the higher and higher price tag consumers pay can afford to buy. So, when you add up this new extra goods consumers demand, you get what economists call “the equilibrium price”, which then rises until supply exceeds the total supply of goods and services, that is until the total supply hits the maximum price of all your goods and/or services, which occurs when everything you have demanded you now has and no one else wants to buy, and so you will have to either buy all that stuff to make more money or give away some to a relative or friend or relative, which means giving away some of your wealth to someone else or exchanging your goods/services for something you don’t want to keep, in order to reduce your risk of having to give away some or the equivalent amount of money that was already spent.

This is why the price of oil is higher than other non-oil products as well, because the additional resources necessary for manufacturing and distributing oil are usually worth hundreds of dollars per ton or pound of oil, whereas other products require far less. And this was the case before the 1970s when oil was relatively cheap. Of course, the emergence of alternative technologies such as the internet and cell phones has drastically reduced the price of energy in other aspects, but oil still accounts for over 80% of global output and over 90% of the global GDP. And this is a lot more than any other natural resource, perhaps including gold, which may account for an equal percentage.

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