Lead:

The supply and demand of the market are different in the short period of time and the situation in the long term, supply and demand are inelastic in the short period of time and elastic in the long period.

In September 1960, the Petroleum Exporting Countries established the Organization of the Petroleum Exporting Countries, or OPEC (OPEC). OPEC aims to ensure the stability of oil prices in the international oil market by eliminating harmful and unnecessary price fluctuations, to ensure that member countries can receive stable oil revenues under all circumstances, and to provide oil consuming countries with sufficient, economical and long-term oil supplies. Its objective is to harmonize and harmonize the oil policies of the member States and to determine the most appropriate means to safeguard their individual and common interests. However, the overall price of oil from the 70s of the 20th century to the end of the 20th century was not controlled by OPEC.

Over the past few decades, many of the most devastating events for the world economy have originated in the oil market. In the 70s of the 20th century, the member countries of the Organization of the Petroleum Exporting Countries (OPEC) decided to raise world oil prices in order to increase their revenues. These countries have achieved this goal by collectively reducing the oil production they provide. From 1973 to 1974, the price of oil rose by more than 50 percent from the original level. A few years later, they did the same thing, and between 1979 and 1981, the price of oil almost doubled.

However, OPEC is finding it difficult to maintain high prices. From 1982 to 1985, the price of oil fell at a rate of 10 percent per year. Discontent and confusion soon spread to OPEC countries. In 1986, cooperation between OPEC members broke down completely, and the price of oil plummeted by 45%. In 1990, oil prices returned to 1970 levels and remained there for most of the 90s of the 20th century. We need to distinguish that in the first decade of the 21st century, there was a sharp rise in oil prices, but the main driving force was not OPEC's supply constraints, but the increase in world demand.

These events show that supply and demand in the market are not the same in the short term as they are in the long term, with supply and demand being inelastic in the short term and elastic over the long term.

In the short term, both the supply and demand for oil are relatively inelastic. Inelastic supply is due to the fact that known oil reserves and oil extraction capacity cannot change quickly, while inelastic demand is due to buying habits that do not immediately react to prices, which leads to a sudden imbalance between supply and demand for oil in the market.

This is not the case in the long term, where oil producers outside OPEC have responded to high prices by stepping up oil exploration and building new extraction capacity to increase exports. Consumers responded by using petroleum products more frugally, such as driving less private cars and using public transport more. replacing old-fashioned fuel-guzzling cars with new fuel-efficient vehicles, etc. As a result, long-term supply is more resilient.

This analysis explains why OPEC has only succeeded in keeping the price of oil high for a short period of time, and the price has fallen back over time. When OPEC members agree to produce less of their oil, their supply decreases, and prices rise quickly in the short term, so OPEC members' revenues increase. In contrast, in the long run, when supply and demand are more elastic, a decrease in supply of the same magnitude causes only a small change in prices. Therefore, OPEC's joint supply reduction is not profitable in the long run.

In fact, such things are not uncommon, and the food crisis that has occurred in recent years illustrates this. In 2008, the ferocious food crisis swept the world, and there was a large food deficit in this country, resulting in a global problem, and by 2010, the food problem no longer dominated the world. In a short period of time, there has been a serious imbalance in the supply of food, which has caused both supply and demand to lose their elasticity, resulting in a food crisis. However, over a long period of time, grain-producing countries have increased their grain production and grain output, thus increasing their grain exports, and this contradiction has been slowly resolved.

In the era of market economy, without a complete monopoly of the market, it is impossible to increase efficiency if we want to seek benefits by reducing supply in this way. Since supply and demand are elastic in the long run, after a long period of market digestion, a state of equilibrium can always be reached. Therefore, if we want to make more profits, we must start by choosing a peculiar distribution method. After all, it is not a long-term solution to adopt market-destroying behavior.