Economies, Markets and Strategic Decisions Coursework - 1

Economies, Markets and Strategic Decisions - Coursework Example In fact, China has shown a uniform demand for 40% of the global oil- demand since last four years. Oil demand in India has increased by 75% within last 15years of time. Considering the supply side, a number of oil-producing countries such as Iraq and Venezuela have gone through turmoil that has affected their capability to produce and supply oils at their full capacity. In recent times, OPEC (The Organization of Petroleum Exporting Countries) which is an association of 13 countries mainly from Middle East has evolved as the single largest entity for supplying oil throughout the world. In fact, the consortium holds the power of increasing or reducing the oil price through altering the oil supply (Perry, 2013). Global oil inventories play an important role in balancing the global supply and demand for oil. If the quantity produced exceeds demand, the excess supplies are stored for future use and when the consumption surpasses the demand for oil, that inventories are used to satisfy the amounting demand. Though the OPEC countries are responsible for only 40% of the oil supply where 60% of the supplies are controlled by non-OPEC countries, the Non-OPEC suppliers are incapable to influence market price of oil due to insufficient reserves holding by them. Ability of OPEC to maintain the largest oil inventories in the world aids the consortium price of oil through adjusting the supply of oil, especially when the supply of oil by non-OPEC provinces declines further (U.S. Energy Information Administration, 2015). The demand and supply of oil directly impacts the oil prices. If the demand for oil increases due to shortage in supply, the price of oil shots up. In contrast, if there is excess supply due to lack of demand, the oil price is likely to go down. However, the demand and supply of oil is instigated by multiple factors which in turn strive to modify the level of oil price. In the