ORGANISATION OF PETROLEUM EXPORTING COUNTRIES- OPEC ( MAJOR SUPPLIERS) VERSUS ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT- OECD ( MAJOR BUYERS) In the short run, both the supply and demand for crude petroleum oil are relatively inelastic. Supply is inelastic because the quantity of known crude petroleum oil reserves and the capacity for oil extraction cannot be changed quickly, as price fluctuates, couple with the indiscipline of some OPEC member countries in dire need for money for development, often exceed their official stipulated quota at whatever world market crude oil price. Thus, inelastic supply Demand by OECD member countries, mainly buyers of crude petroleum oil for energy needs for their advanced technologically driven economic and production systems, so their buying habit do not respond immediately to changes in price. Thus inelastic demand. ( Mankiw, 2018: p104.) Examine with case by case scenario, the other factors responsible for the above stated trend in the world market for crude petroleum oil.
Reasons behind inelastic demand for crude petroleum oil :
Oil has very few direct substitutes . Solar enery , wind power are equally difficult to generate and also expensive . Oil is an indespensable source of enerygy till date . This makes it inelastic in nature .
Reasons behind inelastic supply for crude petroleum oil :
Crude petroleum oil is like a fixed asset . It takes millions of years to form oil reserves and exploration of new reserves is also expensive . So at a particular point of time supply quantity is fixed . So supply is also inelstic .
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