Essay on Factors that Determine the Price of Oil in the Market

Essay on Factors that Determine the Price of Oil in the Market Factors that Determine the Price of Oil in the Market Dec 20, 2018 in Economics The Organization of Petroleum Exporting Countries (OPEC) It is a consortium of 13 counties and is the largest single entity that impacts on world's oil supplies. It provides for 40% of oil in the world, and sets rules and regulations among its members to meet global consumption of oil. By increasing or reducing oil production among its member states, OPEC is able to affect the price of crude oil. When oil production exceeds its demand, the excessive supplies can be stored. If consumption is more than the demand, inventories may be tapped in order to meet the increased demand. The connection between oil inventories and oil prices enables corrections in both directions. Although non-OPEC are 50% larger than OPEC, they lack sufficient reserves to enable them control price and can only react to market fluctuations. OPEC can influence market pricing directly, especially when oil supply from non-OPEC countries reduces.