By- Zenab Ahmed & Hamna Siddiqui *
Historically, oil has been cheaper and more abundant than any other energy source and this condition changed very soon.
Oscillation in demand and price of oil was rather modest for the first hundred years of the oil age, when price was largely determined by the lowest-cost, large-scale producers until the mid-twentieth century.
Through the 1960’s, the transfer of wealth from oil trading was mostly insignificant to the global economy. Price and cost had a fair relationship due to competition and supply exceeded demand; the low-cost producer was successful. To the general public, the prolific fields of the Middle East, United States, Venezuela, North Africa and the North Sea seemed to provide an inexhaustible supply of cheap oil and modest prices encouraged extravagant consumption. The price for oil can be detached from the cost to produce for limited periods of time. For example, a low-cost producer may reduce competition by lowering the price below cost. In contrast, if demand exceeds supply, price is determined by the highest bidder. From a global viewpoint, the cost of production varies widely between the largest fields and the more modest sized…
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* Zenab Ahmed & Hamna Siddiqui both are the students of Masters in Economics at Aligarh Muslim University. They posses keen analytical ability over the various economic issues. This paper presented by them on the eve of ECO-FEST of department of economics, AMU,Aligarh.