...An Anatomy of the Crude Oil Pricing System Bassam Fattouh1 WPM 40 January 2011 1 Bassam Fattouh is the Director of the Oil and Middle East Programme at the Oxford Institute for Energy Studies; Research Fellow at St Antony‟s College, Oxford University; and Professor of Finance and Management at the School of Oriental and African Studies, University of London. I would like to express my gratitude to Argus for supplying me with much of the data that underlie this research. I would also like to thank Platts for providing me with the data for Figure 21 and CME Group for providing me with the data for Figure 13. The paper has benefited greatly from the helpful comments of Robert Mabro and Christopher Allsopp and many commentators who preferred to remain anonymous but whose comments provided a major source of information for this study. The paper also benefited from the comments received in seminars at the Department of Energy and Climate Change, UK, ENI, Milan and Oxford Institute for Energy Studies, Oxford. Finally, I would like to thank those individuals who have given their time for face-to-face and/or phone interviews and have been willing to share their views and expertise. Any remaining errors are my own. 1 The contents of this paper are the authors’ sole responsibility. They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members. Copyright © 2011 Oxford Institute for Energy Studies (Registered Charity, No. 286084) ...
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...impact on GDP and on the masses. Why are these problems visible in a country like Kenya? Because so many other problem are putting multiplier times negative impact on GDP and other macro economic variables such as inflation. Oil and other petroleum products are scarce commodities in the world. Like prices of other commodities the price of crude oil experiences wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years responding to changes in demand as well as OPEC and non-OPEC supply. Throughout much of the twentieth century, the price of U.S. petroleum was heavily regulated through production or price controls. In the post World War II era, U.S. oil prices at the wellhead averaged $28.52 per barrel adjusted for inflation to 2010 dollars. In the absence of price controls, the U.S. price would have tracked the world price averaging near $30.54. Over the same post war period, the median for the domestic and the adjusted world price of crude oil was $20.53 in 2010 prices. Adjusted for inflation, from 1947 to 2010 oil prices only exceeded $20.53 per barrel 50 percent of the time. (See note in the box on right.) Until March 28, 2000 when OPEC adopted the $22-$28 price band for the OPEC basket of crude, real oil prices...
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...Select an organization with which you are familiar, and identify an issue within that organization that would have both organizational and societal implications. In this essay I will identify what Crude oil Fracking is provide some issue/s within the fracing community on how certain societal implications where certain groups are protesting these organizations. That as any industry were the environment such as land, water, and mostly wild life is being disturb all for global oil domination. What is fracing? It is a relatively new type very new began in Ohio in 2011(OEC.org 2011). High capacity drilling were the main ingredients are sand, water and various potent chemicals. This concoction is infused at high pressures shale rock to break it open and release the highly volatile natural gas. So drilling companies can use a certain drilling process called “Horizontal drilling” to mine the oil pockets underneath. This this new type of drilling involves an enormous supply of fresh water and chemicals in which these fracing companies will not divulge what these chemicals are. All of this new technology is effecting nearby communities and small towns with at times toxic air discharges, water contamination and ecological concerns related to the disposal of the waste. With those concerns the Ohio Environmental Council (2011) temporarily stopping the fracing crews to do test on the public health risk. Soon after the U.S. EPA sent a study that the EPA conducted in December...
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...Willie Walsh as the “harshest environment the airline had ever faced” (Walsh, 2009) resulted in a dampening demand for airline travel. Therefore customers including business travelling customers who were known as BA’s traditional core customer, their loyalty switched towards low-cost airlines such as Ryanair and Flybe, who remained competitors to BA through that time, especially during the volatile conditions of the recession. However, airlines in the same manner as BA are particularly vulnerable not just to global economic conditions, they are also equally affected by external events from 9/11 style terrorism to ebola to the Iceland ash cloud and especially fluctuations in oil prices. A dramatic increase in oil/jet fuel prices is usually associated with a recession; therefore the fluctuations in oil prices had a heavy...
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...government can change at anytime, which may translate into a change at the top management of many, if not all of these government owned organizations. Economic: Professional Essay Writers Get your grade or your money back using our Essay Writing Service! Essay Writing Service During FY09, the loss after tax came to Rs. 6.7 billion versus profit after tax of Rs. 14 billion during FY 08, mainly due to higher financial servicing cost and the inventory losses which incurred during the first half of FY09. [1] Extremely volatile oil prices were a major outcome of the global financial crisis The supply and consumption decreased due to the economic slowdown of our economy. This was caused as a result of inflation that was caused by high oil prices and adversely affected our country's Industrial sector. Reduction in refining capacity of different refineries due to a major increase circular debt Significant increase in import of oil in the country Pakistan's economic growth is quite slow. Inflation is at its highest, while the interest rates are at their...
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...Corporate Social Responsibility Practice in Australia 24 April, 2016 prepared by Executive Summary This report provides an analysis and importance of CSR reporting in mining industry, how well companies disclose social and environmental issue according to GRI guidelines. This article’s main focus is to describe trends of CSR reporting in mining companies in Australia. This article provides detailed overview of companies reporting format and structure, CSR disclosing motivation, how well company account for job losses and impact of reduction of oil price on companies. The purpose of this report is to describe CSR practice of mining companies in Australia and highlights the importance of sustainability reports regarding social and environmental perspective. This report is based on two major mining companies namely BHP Billiton and Rio Tin. The information used for writing this article is gathered from different researcher, annual reports, newspapers, and online articles, GRI guideline. Only Secondary data used to write report and study based on ASX registered companies companies in Australia are more aware of GRI reporting standards now and also know that how crucial it is to report on the sustainability issues from social and environmental perspective to have long term business and secure future. . Contents Executive Summary i Contents ii Introduction 3 Question a 3 ...
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...Virginia State University British Petroleum (BP) is one of the top oil producing companies in the world. They are responsible for all aspects of the business, from exploring to find new underground oil supplies, to marketing and selling the finished product and everything between. Because of BP’s wide array of operations, there are many different drivers of their business. BP’s main operation is sales of refined oil, where it earns about 70.1% of its revenues, while another 24.7% of its revenues come from the sale of crude oil. The other small percentage of their revenues come mainly from buying/selling other companies, joint ventures, and interest earned on investments. The goal of this study is to run linear and multiple linear analyses on the data collected to predict first quarter 2015 results for net revenues, operating costs, and profits of BP. To establish the main drivers of revenue, operating expenses, and net profit, I used simple percentages and correlations. Most of the items in the research were extracted from BP’s quarterly financial statements from 2011-2015 (2015), with the exception of quarterly average Brent Crude oil prices during the same time period, which were pulled from Yahoo Finance (2015). By using simple percentages, I was able to see which line items from the income statement were responsible for the majority (in USD) of each category during the timeframe of the study. Brent Crude Oil prices were, of course, not on the financial statements of BP, but...
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...---------------------------------------------------------------------------6 6. Reference ----------------------------------------------------------------------------10 Introduction Oil is an important source of energy in the world economy as a major component and raw materials in the millions of industries. Oil price suffer from high volatility and fluctuations as a traded commodity in global markets. Oil is a wealth non-renewable and it is distributed randomly all over in the ground. According to the Energy Information Administration (EIA), the world currently consumes 85.64 million barrels of crude oil daily [1]. It represents the largest proportion of the world's energy consumption compared to other sources [2]. We are going to predict oil prices and analyze various kinds of factors that influenced in oil price. The world had suffered from political in recent years instability wars and conflicts, especially in the Middle East oil-rich areas such as Tunisia, Libya, Egypt, and Syria with the acceleration of technological development. This had influences on the exchange rate in the oil market and volatile behavior of trading. So it is necessary to follow-up in oil prices and monitor prices and the forecast oil price movement. The primary purpose of this analysis is to provide a further contribution to analyze the correlation between oil prices and the main fundamental factors influenced them such as...
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...FAO COMMODITY AND TRADE POLICY RESEARCH WORKING PAPER No.22 Threshold cointegration in the sugarethanol-oil price system in Brazil: evidence from nonlinear vector error correction models George Rapsomanikis and David Hallam1 Commodities and Trade Division Food and Agriculture Organization of the United Nations September 2006 1 The authors are Economist and Chief in the Trade Policy Service, Commodities and Trade Division. FAO Commodity and Trade Policy Research Working Papers are published by the Commodities and Trade Division of the Food and Agriculture Organization of the United Nations (FAO). They are working documents and do not reflect the opinion of FAO or its member governments. Also available at http://www.fao.org/es/ESC/ Additional copies of this working paper can be obtained from Olwen.Gotts@fao.org The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. All rights reserved. Reproduction and dissemination of material in this information product for educational or other non-commercial purposes are authorized without any prior written permission from the copyright holders provided the source is fully acknowledged. Reproduction...
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...Oil Prices’ Impact on Economic Growth Since 2008, the U.S. has seen one of the slowest recoveries from a recession since the Great Depression. Never before since World War II has either inflation adjusted GDP or unemployment rate been below where it was four years after a recession began. Our economy in this recovery could have grown and created jobs at the average rate like the 10 previous postwar recessions. GDP per person could be $4,528 higher and 14 million more Americans would be working today (Gramm and Solon). Economists claim that the lack of strength in the recovery was due to the depth of the recession and underestimating the severity of the economic disaster. Another speculation is that the financial crisis, by the very nature is a much slower and more difficult recovery. A recession is generally defined as a decline in GDP growth in a six-month period. So what can keep the GDP, or the value of all consumed goods, from returning to a healthy economic state? Oil is a primary source of energy we use everyday. The more oil we use, the faster the economy grows. Over the last forty years, a 1 percent hit to the world oil consumption has led to a 2 percent increase in GDP. That means if GDP increased 4 percent a year, like before 2008, oil consumption was increasing by 2 percent a year (Anandan, Ramaswamy, and Sridhar). Statistically, in 2006 figures display that the average oil price was $67.65 per barrel. In 2008 when the recession hit, the average oil price was...
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...First microeconomic issues question that I pick would be Everyone’s gasoline problem. As we all know that the prices of the gasoline at the pump keeps fluctuate because gasoline prices related to crude oil prices. The crude oil prices make up 66 percent of the gasoline’s price and the rest of the percentage, around 34 percent would be distributed into some more costs, included taxes, and company’s profit. In order to deal with daily change of price of the gasoline, the 34 percent of the costs that they distributed usually stay stable, so by then it will be more accurate to reflect the oil price fluctuation. Oil prices affected by supply and demand as any other businesses related to supply and demand, also the price of the oil is related to commodity exchange based on the future oil price. As we know, the higher the demand on certain period of time, the higher the cost or the price of the oil/gasoline. The United States of America uses 20 percent of the world’s oil and two third of these is believe to be for transportation purposes. For future oil price, it is also depend on supply and demand in order to determine the price. If traders think the demand will be high, of course this will raise the price of the oil. There are few factors that cause the gasoline price to quickly rise and fall in a short period of time, included supply, demand, and competition as well as federal, state and local regulations. These policy makers will be the one that evaluate and choose the...
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...Briefings For The Week Monday 19th to Friday 23th Oct Monday 19th October 2009 The first article that caught my eye at the beginning of the week was one that read “crude oil prices hit a one year high”. This is a big blow to the whole industry because now all the airlines have to fork out even more money some may not have to purchase the fuel which runs their planes. If this continues some airlines may have to go out of business as they simply cannot afford to go further in debt which alternatively would end in bankruptcy. I believe the reason behind this rise was because of the stock markets rapid inflation and the dollar continuing to slide. However it should be taken into consideration that this was the 1st time since October 14th 2008 that Crude has settled over $75 a barrel and although this may suggest that this is a one of, because of the dollars downfall, other currency holders from overseas may see this has a slight advantage over the dollar. Europeans who have a very strong currency can easily step in and buy the oil which in short would be cheaper for them and more expensive for their American rivals. Another segment that I found interesting was about the long running debate on whether federal lawmakers should create a passenger bill of rights. A lot of people seem to think that airlines are not doing enough to meet people’s basic needs for enough food, water, hygienic toilets and temperature control. If these rights are introduced it would be great for the passenger...
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...to the WTI Cushing Crude Oil Spot Price West Texas Intermediate (WTI), also known as Texas Light Sweet, is a type of crude oil used as a benchmark in oil pricing and the underlying commodity of New York Mercantile Exchange's oil futures contracts. WTI is a light crude oil, lighter than Brent Crude oil. It contains about 0.24% sulfur, rating it a sweet crude, sweeter than Brent. Its properties and production site make it ideal for being refined in the United States, mostly in the Midwest and Gulf Coast regions. WTI has an API gravity of around 39.6 (specific gravity approx. 0.827) per barrel (159 liters) of either WTI/light crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma, or of Brent as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange has been incorporated) for delivery at Sullom Voe. Cushing, Oklahoma, a major oil supply hub connecting oil suppliers to the Gulf Coast, has become the most significant trading hub for crude oil in North America. The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration (EIA) uses the imported refiner acquisition cost, the weighted average cost of all oil imported into the US, as its "world oil price". The demand for oil is highly dependent...
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...Markets and their Impact on the Global Marketplace. Has Asian Industrialization had a Negative Impact on the Global Marketplace? The global marketplace has seen a large shift in buying power in recent years. Former world leaders have seen their influence on the marketplace dwindle as industrialization begins to take hold in countries previously not seen as traditional powerhouses. Worldwide, prices have risen at a rate never before seen. With a burgeoning population of middle class workers, Asia as a whole, and China and India specifically, have fueled this pricing explosion. Research shows that the development of these former 3rd world countries is responsible for a large increase in global pricing due to the high demand for steel, oil, and agricultural products. One major industry which has been affected by this shift is the steel industry. The demand for steel along with the decreased supply has caused prices to increase by 25 to 45 percent in the US market. (Van Der Schans, 2007). Several factors have coincided to deal a damaging blow to the US steel market. Firstly, China and India have become major players in the steel industry, accounting for the consumption of over 25 percent of the worldwide steel supply. Cooney found that, “China has become both the world’s largest steelmaker and steel consumer.” (2006). China’s ability to dictate the market has led to a global shortage of structural steel, and as most people are aware, when the supply dwindles and the demand...
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...Commodity Exchange Market in Bangladesh Prepared by Kamal Uddin Department of Banking &Insurance Faculty of Business Studies, University of Dhaka Outline Rationale Define Commodity & Commodity Exchange Market How Commodity Exchange Market Works? Necessity of Commodity Exchange Market in our Economy Requirement for a Commodity Exchange Market What Bangladesh Doing? Recommendation Rationale: Price Volatility in Our Economy Reason Behind Price Volatility • Intermediaries between producers & end-consumers. • Syndication. • Absence of a proper market system. To remove this barrier a proper market system is required where buyer and seller will have the regular & updated information of market, they will have direct access to market for buying and selling their desired products. This can be done by establishing a Commodity Exchange Market Define Commodity and Commodity Exchange • A Commodity is a product which has a commercial value. It can be produced, bought, sold and consumed. • A commodities exchange is an exchange, just like any Stock Exchange where various commodities and derivatives products are traded. Most Commodity Exchanges across the world trade in agricultural products and other raw materials • To be traded on an Exchange must meet certain specification regarding self life, quality standard, demand and supply and some more. Functionalities Spot or Cash • Direct buy and sales • Usually for immediate consumption • Immediate delivery &...
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