Petrol prices in Australia have been rising steadily through all of 2021 and have reached new highs in March 2022. With
Posted: Sun May 08, 2022 9:01 am
Petrol prices in Australia have been rising steadily
through all of 2021 and have reached new highs in March 2022. With
fuel cost being one of the key components of the household budget,
the rising price of petrol has received a lot of attention in the
popular press as well as among the policymakers at the various
levels of government. In this report you will look into the factors
that drive these changes in the petrol market as well as evaluate
some of the policy proposals aimed at addressing the rising cost of
petrol.
As we know, petrol is made from oil. Australia’s own
production of oil is not sufficient for the needs of the domestic
market. Consequently, much of the petrol is either imported from
other countries or is produced domestically at the two domestic oil
refineries in Geelong, VIC and Lytton, QLD, using the oil sourced
from the global oil market. Consequently, to understand the petrol
market we need to look into the global market for oil first. For
the purposes of this question, we will assume that the global oil
market is competitive.
Use the demand and supply model to explain how the price
of oil is determined in the global market. Briefly discuss the
factors that influence the supply of oil (supply shifters) and the
factors that influence the demand for oil (demand shifters). Which
of these factors do you think are responsible for the recent price
dynamics in the oil market? Illustrate your answer on a graph,
including all relevant supply and/or demand shifts and the
corresponding changes in the equilibrium price and
quantity.
through all of 2021 and have reached new highs in March 2022. With
fuel cost being one of the key components of the household budget,
the rising price of petrol has received a lot of attention in the
popular press as well as among the policymakers at the various
levels of government. In this report you will look into the factors
that drive these changes in the petrol market as well as evaluate
some of the policy proposals aimed at addressing the rising cost of
petrol.
As we know, petrol is made from oil. Australia’s own
production of oil is not sufficient for the needs of the domestic
market. Consequently, much of the petrol is either imported from
other countries or is produced domestically at the two domestic oil
refineries in Geelong, VIC and Lytton, QLD, using the oil sourced
from the global oil market. Consequently, to understand the petrol
market we need to look into the global market for oil first. For
the purposes of this question, we will assume that the global oil
market is competitive.
Use the demand and supply model to explain how the price
of oil is determined in the global market. Briefly discuss the
factors that influence the supply of oil (supply shifters) and the
factors that influence the demand for oil (demand shifters). Which
of these factors do you think are responsible for the recent price
dynamics in the oil market? Illustrate your answer on a graph,
including all relevant supply and/or demand shifts and the
corresponding changes in the equilibrium price and
quantity.