consequence of rise in its price.A third factor in the oil glut was decreased demand for oil. The 1980 economic recession, which had plagued the world economy and which had markedly reduced the productive capacity of industrial nations by its greatest percentage decline since World War II, was a dominant force in reducing the demand for oil yet further. As their gross national products headed downward because of the recession, industrial nations reduced their imports. This, in turn, led to a reduction in foreign exchange earnings of the less-developed countries. These had, therefore, to curtail their purchases from abroad, including imports of oil. A multiplier effect of all such factors had a marked effect on the demand for oil in world markets. (http://www.georgetown.edu/users/johnsonj/oweiss/petrod/since.htm)DEMANDDemand for Oil over Time (http://www.georgetown.edu/users/johnsonj/oweiss/petrod/time.htm)A conventional downward-sloping demand curve is not, in [Dr. Oweiss]opinion, sufficient to explain the interaction of oil prices and quantity demanded over time. In studying the dynamics of international oil markets which differentiates between upward and downward trends in prices. A small rise in the price of oil, from its low, pre-1973 level, will not change the quantity demanded, for demand at such a low level may he regarded as perfectly inelastic. Yet, as oil prices are substantially increased, quantity demanded must be somehow reduced. Such a response makes the demand curve at higher prices less inelastic than before. This suggests that as prices are increased over time, the demand curve becomes concave in relation to the original axis. Yet as oil prices fall in response to a glut or for other reasons, a conventional downward-sloping demand curve could be applicable.As oil prices rise slowly from PA to PC, the demand curve is inelastic as it moves from point A to point C. Quantity of oil demanded is perhaps slightly reduced from ...
