...The Effects of Falling Oil Prices in Venezuela X W National Introduction Venezuela was founded in1845. It is a member of the Organization of the Petroleum Exporting Countries (OPEC) and located on the northern coast of South America. It is one of the largest crude-oil producers and exporters in the world. “Venezuela’s oil revenues account for about 95 percent of export earnings. The oil and gas sector is around 25 percent of gross domestic product.” (OPEC, 2015) Venezuela is also very famous for its petroleum industry. Except Petroleum, the country’s natural resources include natural gas, iron ore, gold, bauxite, diamonds and other minerals. According to Shehryar (2015), “Since June 2014, a substantial decline in oil prices has occurred, bringing prices of oil down to a five-year low. Venezuela’s oil-dependent economy, without a competitive non-oil sector, has now been facing a tremendous challenge as the per-barrel prices hit a five-year low, with the situation expected to worsen by the first half of 2015.” In this paper, I will introduce the trends of oil and exports in Venezuela and show the effects of the falling price on Venezuela. Trends of Oil and Exports in Venezuela Figure 1 displays the trend of the oil price in Venezuela. Pump price for oil in Venezuela was last measured at 0.02 US dollar per liter in 2012. It was declined from 0.14 US dollar per liter in 1999. The declining trend was huge between 1999 and 2004 and turned down to be smooth after 2008....
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...Oil price: traders and CEO’s clash over recovery prospects OBJECTİVES *What is the OPEC and it’s main goals? *Why are oil prices falling? *Who are the winners and who are the loosers? *Consequences of falling prices. *Important comments about oil price. What is the OPEC and it’s main goals? Organization of the Petroleum Exporting Countries (OPEC), a permanent, international organization headquartered in Vienna, Austria, was established in Baghdad, Iraq on 10–14 September 1960.Its mandate is to "coordinate and unify the petroleum policies" of its members and to "ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry. In 2014 OPEC comprised twelve members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Why are oil prices falling? Here are four main factors driving oil’s sharp decline: 1. US oil production is booming Exploding US oil production has transformed one of the world’s leading oil consumers into one of its leading producers as well – in fact, North Dakota alone produces a million barrels of oil per day. US production now rivals oil giants Saudi Arabia and Russia, largely thanks to innovative drilling that has unlocked oil and natural gas deposits trapped in shale rock. US production has...
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...formed around prior victories or defeats. From the Chevy Volt case, we can see that GM is a large complex organization and has a lot of processes to make any decision in changing their strategic plan. Moreover, they sticked to the past failure that they had experienced. Therefore, they moved too slow and missed the opportunity to change or adapt themselves to the external trend or a better opportunity. The nature of strategy made was based on the following factors • Increase in oil price • Limit carbon emission go green • The cost of manufacturing lithium ion batteries was falling 2. What trends in the external environment favoured the pursuit of the Chevy Volt project? Trends included increases in oil prices :-Gas price was increasing sharply because of growing demand in developed countries including China and India -Global Warming become a significant concern so people trend to use the car which produce less Carbon Dioxide. -The cost of Manufacturing lithium ion batteries was falling and new technology make them more powerful, competitive use of battery technology for fuel efficiency. -Demand for fuel efficient car like Prius (Toyota) that utilize new battery technology shows the customer demand for fuel efficient cars 3. What impediments to pursuing this project do you think existed within GM? Cost is one of the most important hurdles in pursuing with Chevy Volt -GM already spent a huge investment in developing fuel cells. The presence of GM senior management...
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...Asia – economic variables, import and export of Asia The degree of impact of China’s slowdown on Malaysian companies vary depending on the price competitiveness, availability of substitution, type of business and the management’s ability to minimise the impact (Malaysia Chronicle, 2015). 1. Export The slowdown in China’s economy will ultimately impact Malaysia’s exports demand. China is Malaysia’s second largest export market, accounting for 15 percent of its export economy (Springfield, n.d.), Malaysia-China two-way trade topped $100 billion in 2014 (Kurlantzick, 2015). Both goods and services industries are affected in line with slowdown in China’s domestic demand, namely key export products such as electronic component, transport equipment and palm oil, manufacturing sector; and services industries including trading, shipping and tourism which are externally oriented (Singapore Business Review, 2013). Slowdown in China’s economic growth also weakened its currency, thus consumers will consumed more locally-produced goods as imported goods becomes more expensive (Kok, 2015). 2. Import 1% drop in China’s growth rate is due to 4% appreciation in RMB as an act of shifting demand from export to consumption and 1% increase in wage. As labour cost and RMB becomes more expensive, China exports price rises, thus Malaysia import price increases, contributing to capital outflow and increased CPI (Bokyeong, n.d.). 3. Growth The fall in exports also caused slowdown in growth...
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...up. Close to its all-time low, the rupee has companies worried. And the prognosis isn’t bullish. Economists expect the rupee to fall further. The exchange rate of a currency, like most commodities, is determined by the laws of demand and supply. Foreign institutional investors are cashing out and diving into safer investment bets such as US government bonds. This is making dollars scarce and reducing demand for rupees. Concurrently, the spurt in crude oil prices has pushed up demand for dollars India’s import of crude oil. The RBI can intervene and prop up the rupee by selling dollars in the market, but economists do not expect the central bank to manage the rupee’s rate actively, unless it swings violently. “Given recent indications, I don’t think the RBI will actively intervene to arrest the rupee’s fall, unless there is extreme volatility in the currency market,” said NR Bhanumurthy, Professor of economics at Delhi-based think-tank National Institute of Public Finance and Policy (NIPFP). For exporters, a falling rupee (generally considered good as they get more rupees per dollar) comes alongside a drying up of orders abroad. But shrinking world demand would affect orders, especially for India’s handicrafts, gems and jewellery, leather and textile sectors, negating the gains from a weaker domestic currency. India’s exports growth...
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...Position Paper: Economic Impact of Declining Oil Prices Since the summer of 2014, an excess of supply in the global oil market has led to an unprecedented decline in oil prices. While this will undoubtedly affect nearly every financial market going forward into 2015, it is important to understand the ramifications, both positive and negative, of this particular glut. To find what caused this steep drop-off, it is necessary to look at the drivers of this movement. From a basic economics perspective, oil prices had been inflated prior to this past summer due to high levels of demand due to rapid growth in developing countries (i.e. China), as well as the inability of E&P companies across the world to satisfy this demand. Through the course of 2014, however, both of these drivers began shifting in the opposite direction; high-growth economies began to show signs of maturity, leading to an easing of demand for oil while producers in the U.S. and Canada simultaneously began successfully exploiting shale reserves and alternate sources of extraction, such as fracking, as a source of crude oil. Combined with the lack of cooperation from OPEC to reduce production from the Middle East, oil supply continued to outpace demand. Although alternative means of oil production have been relatively common for some time now, oil prices were being artificially inflated by oil sanctions placed by the United States due to geopolitical conflicts. As these conflicts began to dissipate, the true...
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...Marathon Oil Corporation is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing, and transportation (Marathon Oil Corporation, 2009). The key to optimizing production and resource development is quick and accurate description of oil and gas reservoirs (Marathon Oil Corporation, 2009). For crude oil to be processed into gasoline, diesel fuel, and other petroleum products, it takes about four to eight days (Marathon Petroleum Company, 2009). The benefits of these reservoirs are higher success rates in discovery, drilling, and production activities (Marathon Oil Corporation, 2009). Also, the expertise of Marathon in reservoir characterization begins with seismic imaging, but it emphasizes integration of all geoscience, petrophysical, and engineering data into fully integrated solutions (Marathon Oil Corporation, 2009). Finally, the technology strategy of Marathon is focused on providing technical services that maximize the value of existing assets, develops and applies technology that enables access to new resources, and invests in emerging technologies that address challenges facing the energy industry (Marathon Oil Corporation, 2009). Discuss the relationship between the retail price of gasoline and the price of crude oil. The price a convenience store customer pays for a gallon of gas is dependent upon a number of factors including the cost of crude oil; the wholesale commodity...
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...nationally for falling home prices, according to a recent report by a national mortgage insurance company. Arch Mortgage Insurance Co. ranked Houston No. 2 among 386 metropolitan cities nationally for having the highest risk for declining home prices. The Bayou City has a 38 percent chance of lower home prices in two years. The average risk nationally is 8 percent, according to the Walnut Creek, California-based company. “ Houston home prices are probably going to come down a little bit,” said Ralph DeFranco, Arch’s senior economist and director of risk analytics and pricing. “ I don’t think it’s going to continue to accelerate.” Although Houston has a relatively high risk for falling home prices compared to other cities, it’s important to remember that Houston’s risk is considered “moderate,” according to Arch’s risk model. Houston still is far from reaching the 90 percent risk level that Florida and other parts of the country saw right before the 2008 housing crash, DeFranco said. “Houston is the riskiest in a very stable national economy,” DeFranco said. “There’s a potential risk (for home price declines), but it’s not inevitable.” Houston is at risk because its economy is still largely oil-dependent, DeFranco said. Although the Bayou City’s economy has become more diversified since the devastating oil crash of 1980s, the oil and natural gas industry still constitutes about 38 percent of the local economy, according to the Greater Houston Partnership. With oil prices hovering...
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...As a net oil exporter and Southeast Asia's second largest energy producer behind Indonesia, Malaysia is the country most threatened by falling energy prices. In 2013, Malaysia exported the equivalent of 73 percent of its GDP, of which 22 percent came from exports of natural gas (9 percent), refined oil products (8 percent) and crude oil (5 percent). As of November 2014, Malaysian energy export revenues were marginally growing compared with the year before. Income from overseas crude sales rose 8.2 percent year-on-year, but revenue from natural gas and refined products exports grew by only 1.9 and 0.8 percent respectively. Although numbers are not in yet, revenues likely fell sharply in December and have continued to slide into January and February as benchmark oil prices dipped under $50 per barrel. Reduced export revenues will not be the only place Malaysia will feel the effects of falling oil prices. In 2013, the latest year with full data available, oil-related income accounted for 29.5 percent of total government revenue, but only about 55 percent of that income came from taxes and export duties on domestic production. The remainder took the form of "dividends" from state-owned energy firm Petronas, which runs extensive international upstream and midstream operations in addition to its domestic functions, directly exposing it to fluctuations in global oil prices. On Dec. 2, Petronas announced it would reduce its total payments to the government by $11.8 billion in 2015...
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...ASIA MONTHLY January 2015 Topics Korean household debt total expanding··········································· 1 Korea ················································································································ 3 Malaysia ··········································································································· 4 Philippines ········································································································ 5 China ················································································································ 6 http://www.jri.co.jp/english/periodical/asia/ January 2015, No.166 ASIA MONTHLY REPORT Topics Korean household debt total expanding The economic stimulus measures announced by the South Korean government in July, 2014, included a substantial easing of housing loan restrictions. Bank of Korea also fell in step with the government and lowered its policy interest rate twice. As a result, the expansion of household debt has been reined in. ■ Household debt total 1,060 trillion won ＜Household Debt＞ It has been pointed out for some time now that the （Trillion Won） Household debt burgeoning household debt total constitutes a potential 1,200 Disposal Income risk factor for the Korean economy. The household debt Household Dept to Disposable Income Ratio 1,000 total passed the 1,000 trillion won mark at the end of 2013, and was 1,060 trillion won in September...
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...Question 3 Oil prices and U.S. GDP both fell in 2009. Use a graph to explain this observation of falling oil price and falling GDP. In 2009, world economy encountered one of the most severe downturns due to financial crisis incurred in 2008. The crisis resulted in a period of deflation (refer to Exhibit 1) and failing consuming confidence, which cause a fall in aggregate demand. Decreasing demand shifted the AD curve to left, from AD0 to AD1 (refer to Exhibit 2) so that GDP decreased to Y1. Exhibit 1 We assume all other products price does not change in short run, except oil price. As in equilibrium point B, potential oil supply was greater than current demand, there is pressure to lower oil price to the long-term equilibrium point C and increase GDP to original level, so in result oil price started to decrease after financial crisis (refer to Exhibit 3). US Congress approved the $787 billion economic stimulus package in February 2009. It allocated funds in tax cuts, in extended unemployment benefits, education and health care and in job creation. The package was designed to be spent over ten years. By the end of FY 2009, $241.9 billion had been spent: $92.8 billion in tax relief, $86.5 billion in unemployment and other benefits and $62.6 billion in job creation grants. This stimulus package shifted AD1 to AD2. Meanwhile, under pressure of decreasing oil price and demand, OPEC deducted oil supply in 2009 in order to maintain oil price. SRAS0 should have been shifting...
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...In the mid-2000s, oil prices began to surge due to an increase in global oil consumption. Since oil production in conventional fields could not meet demand, oil prices continued to rise. With oil prices increasing, energy companies saw it profitable to begin obtaining oil from shale formations that were traditionally hard to drill using techniques such as hydraulic fracturing. Such techniques led to a boom in unconventional oil production. Due to these techniques, the United States alone has added 4 million barrels of oil per day to the global market since 2008 (Figure 1). However, such an increase in supply was initially masked by political conflicts in key oil regions (Figure 2). As oil companies in the U.S. continued to see productivity growth, the global market began to drastically change. Oil demand flatlined as economies weakened and cars became more fuel-efficient; this ultimately led to a surplus of oil (Figure 3) that caused oil prices to drop. While companies have utilized hydraulic fracturing (“fracking”) to increase oil production in the U.S., they now are starting to feel monetary constraints due to increased marginal costs. Fracking a well is extremely sensitive to the law of diminishing returns, with output falling about 65% after the first year, causing new wells to be constantly drilled in order to maintain production (Plumer, 2015). However, the decreasing marginal product does allow companies to quickly adjust to falling oil prices by scaling back on...
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...In the mid-2000s, oil prices began to surge due to an increase in global oil consumption. Since oil production in conventional fields could not meet demand, oil prices continued to rise. With oil prices increasing, energy companies saw it profitable to begin obtaining oil from shale formations that were traditionally hard to drill using techniques such as hydraulic fracturing. Such techniques led to a boom in unconventional oil production. Due to these techniques, the United States alone has added 4 million barrels of oil per day to the global market since 2008 (Figure 1). However, such an increase in supply was initially masked by political conflicts in key oil regions (Figure 2). As oil companies in the U.S. continued to see productivity growth, the global market began to drastically change. Oil demand flatlined as economies weakened and cars became more fuel-efficient; this ultimately led to a surplus of oil (Figure 3) that caused oil prices to drop. While companies have utilized hydraulic fracturing (“fracking”) to increase oil production in the U.S., they now are starting to feel monetary constraints due to increased marginal costs. Fracking a well is extremely sensitive to the law of diminishing returns, with output falling about 65% after the first year, causing new wells to be constantly drilled in order to maintain production (Plumer, 2015). However, the decreasing marginal product does allow companies to quickly adjust to falling oil prices by scaling back on...
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...discussing the prices of what things used to be. Discussing how $8 dollars would get you a seat at Tiger Stadium, a hot dog, and a beer. Then the conversation always ends up with him saying "I used to get 6 gallons of gasoline for a dollar" (which equates to just over 16 cents a gallon). Can you imagine six gallons for a dollar? In the spring of 2013 over memorial weekend I paid $3.97 per gallon to fill up my tank. How could this happen? Some want to blame profiteering oil companies, but economists prefer explanations based on supply and demand (Stonebraker, 2013). 1. Soaring gasoline prices are nothing new. It's old hat to those of us with enough gray hair to remember the energy crisis of the 1970's. Gasoline as we all know is made from crude oil. In 1973 a barrel of crude oil was $3.00 dollars. The price of crude oil shot up in 1980 to $35.00 a barrel. Crude oil then took a long slide through the 80's and 90's falling to almost $10 dollars a barrel in 1998 before rising again over the last decade, falling back and spiking again. If we adjust these prices for inflation we get an even more interesting prospective. The chart below traces the price of a barrel of oil over the last 50 years in terms of 2012 prices. The price increases of the 1970's look remarkably similar to those of the 2000's. Adjusting it for inflation, oil prices in recent years are not much different than what we experienced 35 years ago. ("U.S. petroleum and," 2014). 2. All these price changes have been...
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...1. What has caused this major drop in oil prices? The reasons why Oil prices are falling down are twofold, they are due to the simple economics of demand and supply. First of all, we can observe a weak demand in many countries due to insipid economic growth, coupled with surging production. Developing countries and the economies of Europe are becoming less oil dependent thanks to the technology, cars are becoming more energy-efficient. So the demand for fuel is logically decreasing. Added to this is the fact, on the supply side, the oil cartel OPEC is determined not to cut production as a way to prop up prices. Moreover, countries like Saudi Arabia, Nigeria and Algeria are now competing to the Asian markets so producers had to drop prices and USA has gave up the imports as its domestic production has doubled these years. Finally lot of competitors are rising such as Canadian, Iraqi or even Russia and they manage to increase their oil production and exports every year. 2. What economic impact would these lower prices have on the world economy including the USA? Like in every changing situation, there are winners and losers. Consumers all around the world will enjoy a main benefit: less expense for the gas! Low prices are excellent news for oil consumers in places like Japan or the US, where gasoline is the cheapest it's been in years. For example, the price of the gallon, in average, fall from $3.28 a year ago to $2.07 and this drop benefit to lower-income groups in...
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