Question

If the price of petrol drops in Australia during COVID19. What will happen to demand and supply?

Answer 1

Ans:-​​​​​​The fundamental drive for oil price like other commodities is supply and demand in the market.Oil producing nation called OPEC is controlling oil supply in the market and on the other hand oil demand is determined by gasoline for cars and airline travel industries.As said the main determinant of oil price in the market are mainly two factors namely supply and demand and market sentiments.THe law of supply and demand says as demand increases or supply decreases the oil price should rise up.The same way as demand decreases or supply increases the oil price should come down. As we know, in the 2020 the oil price falls amid the covid 19 pandemic and in the result the OPEC and it's allied companies decided to production cuts in order to stabilize price since the demand for gasoline for cars and airline travel has shown a huge decline.So simply Oil price are not fully determined by the supply,demand,market sentiments as law says but supply,demand and sentiments towards future contract of use of oil being traded by specul​​​ators who decide an important role in price determination.