1. The oil industry is an economic powerhouse, and changes in oil prices are closely watched by governments, corporations, investors, and traders. The oil price affects all of us, it is the crown jewel of commodities used in a multitude of ways. The United States, Saudi Arabia, and Russia are the top three oil producers globally, with the war in Russia, global energy prices have surged after the invasion and have continued to rise despite coordinated releases of strategic reserves, making Russian exports even more lucrative. If global supply declines, the global price will increase. Supply and demand based on global economic conditions and geopolitical tensions can significantly impact oil prices. Factors that can shift the supply curve for goods and services, causing a different quantity to be supplied at any given price, include input prices, natural conditions, changes in technology, and government taxes, regulations, or subsidies (Mcfarlane, 2022). We are experiencing the biggest shift in supply chains since the era of globalization began—perpetual disruption is the new normal (Bisceglie, 2022).
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2. Gasoline is a good that has had a significant shift in both demand and supply. The reasons are numerous, but I believe the main drivers are post-COVID demand and policy/world events supply issues. My belief is that industry did not correctly predict that the demand would be as great or as rapid coming out of the COVID pandemic. No one could have predicted when or how the world come out of the pandemic. The reality was there was considerable pent up demand from 24 months of lockdowns, economic uncertainty, consumer hesitation, etc. People started to return going to work, went on vacations and generally just started being active. In addition to the normal scenario of demand impacting the available supply which slowly and gradually drives costs up, there were extenuating circumstances that have greatly accelerated this condition. The Biden administration has repeatedly said they would like to eliminate fossil fuels and have increased regulations and requirements on oil exploration and production. This has made suppliers leery of new investments in leases, technologies and production-increasing strategies. In addition, the war in Ukraine has created restriction on supply coming from Russia and general worldwide uncertainty which does not promote industry investment and growth.
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