The supply of oil“Since 1974, oil-exporting nations have substantially increased their imports to finance development plans and to pay for highly technical military training, equipment and sophisticated systems of defense such as the airborne warning and control system, AWACS. From 1972 to 1983, OPEC imports increased approximately sevenfold. Furthermore, exports to OPEC from the OECD as a percentage of the latter's total exports increased from 4.1% in 1972-73 to 8.8% in 1975-82, then to 8.4% in 1983; and in 1984 it fell to 7.1%”. (http://www.georgetown.edu/users/johnsonj/oweiss/petrod/increase.htm) “The dynamic forces of supply and demand for oil have led to all the oversupply in world markets since 1980 , which in turn led to a de facto decline in the price of oil even before the OPEC London Agreement of March 1983 in which the official price was reduced by around 14%. This glut of oil in world markets was the result of at least three dominant, mutually dependent forces: high oil prices, increased production, and reduced demand. /since.htm)“First, after the initial jump in 1973, the price of oil was increased dramatically again in 1979. This increase led to the substitution of other fuel sources and a reduction in real income, which eventually contributed to a decline in oil demand after a three-year time lag. world oil production – a foreseeable economic consequence of the increase in its price”. “A third factor in the oil glut was the decrease in demand for oil. The economic recession of 1980, which had afflicted the world economy and which had significantly reduced the production capacity of industrial nations with the largest percentage decline since World War II, was a dominant force in further reducing the demand for oil. As their gross national product fell due to recession, industrialized nations reduced their imports. This, in turn, has led to a reduction in the foreign exchange earnings of less developed countries. They therefore had to reduce their purchases from abroad, including oil imports. The multiplier effect of all these factors has had a marked effect on the demand for oil in world markets. http://www.georgetown.edu/users/johnsonj/oweiss/petrod/time.htm) “A conventional downward-sloping demand curve is not, in [Dr. Oweiss'], sufficient to explain the interaction between oil prices and quantity demanded over time. In studying the dynamics of international oil markets he distinguishes between upward and downward trends in prices. A small increase in the price of oil, from its low pre-1973 level, will not change the quantity demanded, since demand at such a low level can be considered perfectly inelastic.