How hike in oil prices affected world market?

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How hike in oil prices affected world market?

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– hike in oil prices, meaning price for oil has increased – demand will decrease due to income effect and substitution effect (meaning that consumers will not buy oil as often) – leftward shift of demand curve – there will be a surplus of oil, ie. extra supply – downward pressure on prices of oil – subsequently demand will increase again – but the new demand level is lower than before – however, using elasticities of demand, oil has an inelastic demand – due to lack of substitutes and is considered as a necessity – thus fall in demand is very minimal – as most people cannot do without oil Therefore, CONCLUSION: demand for oil will fall, but not so much.

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