No Excess Capacity

LONDON, ENGLAND(CNN)--Keeping up with the world's oil demands is a full-time job. World oil consumption is 87 barrels a day but Gulf producers say they can't increase productionOff the Arabian Peninsula oil rigs pump night and day, 365 days a year to produce just part of the two and a half million barrels of oil that come out of the United Arab Emirates.

Demand keeps on rising but from Abu Dhabi to Qatar most of the Gulf's oil producers say they can't increase production any more.

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Since big non-OPEC producers like Britain, Norway and Mexico have decreased their oil production, Gulf oil producers will be in control of the vast majority of the world's output. Hence in this area, Gulf oil producers have the monopoly power due to the large market share.

From the passage, i think the shortage of oil is most likely to be artificially created. The purpose for doing this is to increase the price of the oil in the market. As mentioned, oil production from non-OPEC courties is droped(Thus Lack of substitute). Hence by restricting the output, the present price will go up to reach the new equilibrium price. Since TR=P*Q(price inelastic). Thus, increase price will also cause increase in TR.

However, "No Excess Capacity" may also be true in some extent. Since the world market is changing. AS statistics have shown, a decade ago demand was running at 74 million barrels a day. Today, even with an economic slowdown in the U.S. and Europe, global demand is estimated to hit a record 87 million barrels a day.

It continues to surge because of rapidly developing countries like China and India, not to mention the requirements of the Gulf states' booming. By 2030, world demand is expected to reach 115 million barrels a day.

In this sence, it really exceeds the capacity of the Gulf producers due to the dramatically increase in demand.