Writer's choice Essay Example | Topics and Well Written Essays - 250 words - 27

Writer's choice - Essay Example Krauss and Reed observe that the increase in the production and supply of oil especially in the case of Saudi Arabia is because domestic consumption oil within the country has increased due to a surge in the number of middle-income class of its population. This has led to an annual growth in domestic consumption of 6 percent over the last ten years. Moreover, this growth in the middle-income proportion of the population has also resulted in an increase in taste and demand for luxurious commodities. To meet this ever-increasing demand, Krauss and Reed observe that the Saudi government has spread its refinery business to other nations such as Japan, US, etc., a factor that gives them a huge refinery network that keeps them abreast their competitors. A point to note is that despite the decline in oil prices, the country has no plans whatsoever to reduce their production in their future. This is because the country wants to maintain its market share, and if possible, even expand it, a dream that cutting on production may curtail. Additionally, Krauss and Reed quotes Husseini, a former vice president for Saudi Aramco as saying that it would be unwise second-guess market trends, hence the need to continue with the current production rate. Regarding how the article relates with the course structure, the article outlines a circumstance where the supply of a product, oil in this case, remains unaffected by a decrease in demand prices. While theoretical market dynamics in such a situation expects a correction mechanism that most likely would have been a decrease in supply in order to raise profit margins as outlined by McEachern (2012), the course is totally different. The theoretical concepts as outlined in the course relate to a free market structure, typical of the one observed in the oil industry. Currently, the oil market is self-adjusting