2. What is Oil?
• Crude oil (or petroleum) is found in porous rock formations in the Earth’s
crust.
• According to geologists, it is the product of compression and heating of
organic (pre-historic and ancient organic) materials over time.
• Oil is a significant source of world energy as it is converted into a variety of
fuels such as:
– Gasoline (meeting 90% of vehicle fuel needs across the world)
– Diesel
– Jet, heating and other fuel oils
• It is also used to create petrochemicals which
are used in the manufacturing of cosmetics,
plastics, synthetic materials etc.
• It is probably the world’s most valuable
commodity as it is used as the main means
of energy in every area and region of the
globe.
4. Where is it Found?
• Oil is found in various regions
across the world but the most is
found in the Middle East – or,
Persian Gulf states.
• Almost half the world’s oil is found
there:
– Mainly in Saudi Arabia, Iran,
Kuwait, and Iraq.
• Saudi-Arabia is the world’s largest
oil-producing nation and is one of
the largest oil exporters to the
United States.
• Since countries depend on oil, this
natural resource gives the region
great political and economic power.
5. Where is it Found?
PercentagePercentage
of Oil Worldof Oil World
ReservesReserves
World RegionsWorld Regions
64%64%
10%10% 9%9% 8%8%
6%6%
2%2%
6. What is OPEC?
• OPEC stands for Organization of
Petroleum Exporting Countries
and was formed by Middle East
nations in 1960 to organize their
economies around oil exports.
• There are currently 12 nations
who make up OPEC (Algeria,
Angola, Indonesia, Iran, Iraq,
Kuwait, Libya, Nigeria, Qatar,
Saudi Arabia, United Arab
Emirates & Venezuela).
• OPEC determines the price and
amount of oil produced in each
country each year, which
significantly influences other
nations dependence on the oil
(e.g. 1973 Oil Crisis).
7. Supply & Demand
• Economics (Remember Banjo?)
• Items are sold at the highest possible price people are willing to pay for it
while also allowing the seller to sell all of their goods.
– Supply: The amount of a good available
– Demand: The amount of desire for that good.
– Where Supply and Demand perfectly meet, all of the product is
sold and a company maximizes its profit (called equilibrium)
• These two items are connected.
• To find equilibrium, a seller must adjust the
Price.
– Not enough of a good, Price goes up
– Too much of a good left over: Price goes down
• Example: Apple purposely makes few iPhones
to create competition for
them (how do they compete?
By spending more to get them)
8. Supply & Demand
• Example: Shoes
– In America, people are
WILLING to pay a lot
for things that are not
worth that much
– USA- $300
– China- $6.50
– Made out of the exact
same material
– Demand = HIGH
– Supply = low
– Price = Very High
9. Supply & Demand
• Example 2
• PS4 on launch day
– $600-$10,000 (ebay)
– Very few in stores,
drives up demand,
Price goes up
• Nintendo Gamecube
today
– $20-50 (ebay)
– Lots for sale, very little
demand, price is low.
10. Supply & Demand
On the back of your paper, complete the following by
adding UP or DOWN in the blanks.
a) A trading card company makes only a few of a
valuable Steph Curry card. The supply of the card
goes _____ while the demand for the card goes
_____, meaning that the price should go ____.
b) The newest version of BEATS headphones are
launching and they are cordless and solar powered.
The company isn’t able to keep up with the amount
that people want. The supply has gone ____ and
the demand for the item has gone ____, meaning
that the price of the item will go ____.
11. Supply & Demand
• Oil is very expensive, but we cannot go
without it.
• Oil companies know we have to buy it, so the
price is always high, creating more profit for
them.
• When the supply of a commodity goes down,
what happens to the price?
• What are some factors that may determine
less oil supply?
12. Costs
• How does the increase in costs of oil (per barrel) affect our lives
today?
