Crude Oil Supply
The demand and supply forces are not static and the crude oil prices increase if the demand for the fossil fuel exceeds production capacity. There are few oil fields where the oil production cost is pretty low and the fields have sufficient crude oil to meet the global demands. Crude oil supply mostly comes from such oil fields. Saudi Arabia is a major supplier of crude oil to other countries like the United States, China and India. If the major crude oil producing and exporting nations refuse to supply crude oil due to various reasons then there will be a major global economic crisis. A major challenge in the coming years is to strike a balance between demand and supply.
The significance of crude oil was known to the world when there was a global economic crisis between 1973 and 1979 as the gulf countries refused to supply crude oil to the other nations. Crude oil supply can be determined based on the availability of oil in the world's reserves. The International oil market prices are influenced by factors such as demand and supply. The Organization of the Petroleum Exporting Countries (OPEC) ascertains the supply levels to a huge extent as the demand and consumption forces in United States manipulate the oil prices. Shortage in crude oil supply can be caused due to various factors such as problems in pipelines and unpredicted rise in demand.
To meet the growing demand year by year, crude oil supply has to increase or else maximum oil production level will be reached beyond which there is a possibility of decline in the supply of crude oil. Fluctuations in demand and supply forces can occur due to political, natural and economic factors. In 2005, the United States oil imports accounted for 66 percent. The transportation sector in the U.S is dependent on crude oil supply. If world oil production reduces in the coming years then there will be a shortage in the transportation fuel, which will have a great impact on the economy.
During 2008, there were unparalleled fluctuations in the oil prices. The price of oil soared up to $140/bbl, which was not witnessed before. By the end of 2008, the prices considerably fell to less than $50/bbl due to global economic crisis. The crude oil supply to global markets fluctuated to follow suite according to the supply and demand law. The production in all exporting regions was affected due to this behavior. Due to the unavailability of alternatives for fossil fuel and the rapid growth in the transportation sector, the demand for crude oil in the developing countries like India and China has increased during the past few years.
Crude oil supply can be predicted to some extent based on the growth in demand for oil. To overcome long-term problems rational decisions should be made and major factors such as government policies, taxation and effect of climate change need to be taken into consideration. OPEC members play a major role in influencing global oil supplies to other countries. New production techniques will be used to meet the growing demand and the oil reserves will be expanded in the major oil producing nations.