For example, when oil prices briefly climbed to $150 per barrel in 2007, demand was extremely high compared to the available supply. In response to those high prices, oil companies boosted their exploratory efforts, opening up new resources like oil sands and shale oil production. At the same time, consumers of energy products, such as airlines, took steps to cut consumption by buying fuel-efficient aircraft. The net impact was a major supply and demand shift resulting in a plunge in oil prices below $40 per barrel as of late 2015.
Supply and demand is a basic economic principle you'll find in the financial markets. Calculating a market price for basic goods is what the commodities markets do every day, but supply and demand also have long-term implications that investors should also take into account when making investment decisions.
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