The Price Of Gasoline Prices - 1437 Words

Anybody from Texas who drives a truck has felt glad about paying less money in regards to purchasing gasoline at a gas station. The truth is that the price of gasoline has been dramatically affected by the recent plunge in oil prices. There are different theories that explain the reason of this phenomenon. This paper will analyze the current oil market, as well as the key players who are winning the â€Å"war† of the oil prices. One of the theories that is used to explain this trend in the market is the one exposed by Adam Smith in The Wealth of Nations. Smith generally assumed that the supply price was fixed but that it’s merit (value) would decrease as it’s scarcity increased, creating the law of demand (Smith 57). In this case we can†¦show more content†¦the price) of oil. However, they decided to do the complete opposite. All these global policies and strategies not only include OPEC, but other countries such as the United States of America, who is the third world oil producer. This has changed many times throughout the history, as shown by Tabak Cajueiro who stated â€Å"Due to the limited production of crude oil in the United States in 1971, the power of control of crude oil was shifted from USA to OPEC† (30). This gives us a hint about who the â€Å"players† are that were mentioned above. This is referring to USA and OPEC (led by Saudi Arabia). In this â€Å"battle†, these two countries determine who leads the oil market and control the oil prices. As now the unconventional market is actually led by the United States of America and its amazing development in the technical part of the production. This has led to an extensive production of different types of crude oil that previously were not considered economical. Kilian points out one of these types by stating â€Å"the production of shale oil (also referred to as tight (rock) oil) exploits technological advances in drilling† (1). This was started near 2003 when â€Å"the rapid expansion of U.S. shale oil production was stimulated by the high price of conventional crude oil† (Kilian 1). Therefore, due to a dramatic change in the quotes of the production, the market is affected, which is presented by â€Å"Rising non-OPEC oil production is changing global trade patterns†