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Crude Oil Drops As Supply Takes Over

Demand's Historic Impact On Crude Oil Prices

When China joined the World Trade Organization in December of 2001, crude oil’s price was about $26. Since China became open to world trade, the nation added total oil consumption equivalent to that of Japan and the U.K. China even surpassed the United States as the largest automobile market in the world in 2010. This increase in demand for oil caused the price to skyrocket to a value around $100, and until recently many economists assumed that China would eventually overtake the U.S. as the largest consumer of oil. These forecasts appear to be incorrect, however, as their increased demand for oil appears to be slowing as the country comes up against capacity constraints. Future demand in China looks as if it will be more price elastic, and the oil market is unlikely to find another source that can take over China’s role in increasing world demand. With their ability to continue as a source of increased oil demand in doubt, increased supply has become the main factor dominating the crude oil market.