The law of demand states that if price increases the demand decreases and vice versa but how about oil?

Question

Isn't it that the price of oil increases but the demand on the same way has increased right?

Answer 1

The law of demand does not stat that if price increase the demand decreases.  It says the quantity demanded decreases if price rises.  The price of oil has increased because demand has increased.  You are way off.

Answer 2

demand for oil as a whole has not increased, although the demand for people in terms on investment has, at least in the minds of people who don't know the ins and outs of oil profiteering.

inelastic is correct, but there's a reason. inelastic implies things like food, clothing and shelter. People can try to go without food but eventually they will die. Heating in winter is the same way, and to a lesser degree, Air conditioning. Since oil is the primary power source for electric companies, 18 wheelers, air transport, and boats, in addition to automobiles and most factories, changing oil prices changes the price of 99% of all goods.

Answer 3

They would describe oil prices as inelastic.  People have to have it no matter what price.  People do buy less at $4 a gallon than $1 a gallon.

Answer 4

Oil works a bit differently due to other factors involved in the pricing.  Because the price has increased oil use (demand) in the states is going down and has gone down.  But oil is a global market.  China's consumption is one of the main issues causing oil to rise.  And oil production is controlled by the oil producing nations (OPEC) to keep supply lower than demand thereby cause prices to increase and stay high.

Answer 5

In my view, we have an insatiable appetite to waste fuel! So because we don't drive thriftily and heat thriftily, the oil Barron's, stock holders, taxing bodies, profiteers put the screws to our glutenous use of this fuel.

Fact:

Have you seen more Automobile manufactures advertising better gas numbers on their cars?

Have you heard people saying they won't buy a gas hog or that they can't sell their gas hog or get a trade-in on their truck like auto?

Because of the ensuing thinking and destruction of the economy and our personal gas budget, people are driving less and economizing. This in itself is going to drive the price down. The fuel speculators are already starting to worry about the build up of fuel and some people's desire to conserve!

I believe the oil is available if the Democrats and environmentalists stop putting the human population in jeopardy for the sake of some other day!  We have today to survive or the animals and other countries may buy out America and they will drill and do other things to ravage our land and ship our resources elsewhere!!

So yes the demand causes the the problems.  Use less and talk alternative transportation, better fuel economy, conservation with responsible results (drilling) less driving, hydrogen stations and affordable Hydrogen vehicles.

Answer 6

There are other factors that affect large markets at the same time as the one under study.  Also, there is often a time lag, sometimes years, which depends on all kinds of things.

If a price increase happens just before the busy summer driving season, demand might just go up a little less than otherwise, but not go down.

As people buy smaller new cars due to high prices of gas, future demand might drop as the older cars are taken off the road over a long period, even if prices come back down.

Answer 7

Oil is a unique animal in economics.

As the price went up, the demand did fall as little bit as people cut back on discretionary driving.  However, for most people, the use of oil is not optional but a daily requirement.  Also, there are no substitutes for most people.  If the price of oil goes up, I can't just substitute some other product and expect my car to run.  For other basic products, I can.  Example: if the price of a Gap sweatshirt goes up to a price I'm not willing to pay, I can go buy a sweatshirt at WalMart if I'm cold.

We have worked ourselves into a corner where demand for oil can't really go down.  There are also other international factors to consider.  Oil is a global market.  Even if the price went up and demand went down in the US, there will be another market willing to buy the oil at the higher price.