The Park Place Economist


Crude oil is one of the world’s most important goods. It is used everywhere in the world daily and has many uses, the most common use being gasoline. In the short run, the supply of oil is inelastic; oil rigs can only produce so many barrels of oil per day, and companies will not be able to construct new rigs or implement new machinery. The demand for oil is also fairly price inelastic; consumers will consume large amounts of oil even at high prices due to its high necessity. Because of this high necessity and the inelasticity of demand and supply, it is important to understand the way different short and long run supply and demand shocks affect the market for both crude oil and gasoline, either within the examination of supply or demand.