...independent oil and gas companies have responded to the recent spikes and increased volatility in oil and natural gas prices by stepping up the practice of price hedging to shore up earnings and capital spending. Hedging can be a tricky practice to manage, and guessing wrong on price can do a lot of damage to a company's bottom line. The depth of the recent plunge in US gas prices caught virtually everyone by surprise, so some producers have succeeded nicely with what historically might have seemed high-priced hedges. Others missed a golden opportunity. But, in general, US independents are becoming more comfortable with the practice. While taking a breather from the wild price rollercoaster natural gas prices have been on of late, independents are devising new hedging strategies for coping with the vagaries of ever-more volatile commodity prices. Increased hedging US independents have watched natural gas prices drop from around $10/Mcf in December to about $3/Mcf in recent weeks. Oil prices also have fluctuated, as the world watches the Organization of Petroleum Countries work to maintain its targeted oil price band. Hedging is one strategy that independents use to try to lock in oil and gas prices as they strive for predictable cash flows to support exploration and development spending plans. "Companies have been doing more hedging on gas recently than they have done historically," said Robert Morris of Salomon Smith Barney. "Companies took advantage of high gas prices for two reasons:...
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...High Fuel Prices and its Effect on the U.S. Economy The United States economy as a whole has been rapidly dwindling down of late, from its all time high marks in the late 1990’s and early 2000’s. Many Americans believe that the cause for this large downswing in the economy is due to the fact of the cost that the United States is putting into the War in Iraq. The war has caused some economic inflation over the past couple of years however; there are other factors that tie into the economic problem of America. One key factor that many people are surely aware of is the high and outrageous gas and fuel prices across the country. Though many Americans are aware of the extremely high gas prices, they don’t fully understand how fuel prices have a monopoly effect on the country and how the U.S. economy is greatly affected because of this. (How Gas Prices Affect Our Economy) Over the past few years gas and fuel prices always seem to be in the news. At first, prices seemed to be high one week and low the next. Now, it just seems that the prices are extremely high and won’t go down. Many times you hear big time politicians say the reasoning for these high prices is due to shortages of oil. This is not the case, for there is no shortage at all. Gasoline reserves on hand are at the highest levels they have been since the early 1990s and the oil deposits under ground aren’t running out either. (There Is No Gas Shortage – BusinessWeek ) So why are politicians saying there is a shortage...
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...Introduction In this paper is analyzing the business idea of cousin Edgar to invest in four gas stations in U.S. After conducting researches and analyzing information, there are factors that Cousin Edgar might need to consider before the investment and start up the business. Firstly, the country’s economy health needs to be examined, whether the microeconomic factors, such as the level of demand in gasoline, monthly and a year and the factors that influencing supply of gasoline. Subsequently, macroeconomic factors determine the business idea in producing high profit, and also determining the business span in the short run or even in the long run. Macroeconomic analyzes in oil price According to The World Bank (2014) the total macroeconomic impact of the U.S. oil and natural gas industry is significant. Moreover, the industry was directly and indirectly responsible for over $1 trillion of value- added, or 7.7% of Gross Domestic Product (GDP). Essentially the estimation that the oil and natural gas industry’s total impact on labor income in 2009 was $534 billion (including benefits), which flow to 9.2 million Americans in jobs directly or indirectly in the industry or in jobs supported by those in the industry. In 2007, it is estimated that the industry directly and indirectly contributed approximately $280 billion of revenue to federal, state and local governments. The industry’s impact goes beyond the operations of the companies actively engaged in exploration and...
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...Oil and Gas 2 There are many issues that cause the cost of oil and gas to increase. The main contributing issue to the increasing cost of oil and gas is supply and demand, when demand is greater than supply, the price of oil and gas will increase. The factors that affect supply include increased demand, problems with refineries and pipelines, and disruption to supply or threat of disruption to supply. With the increased demand for oil in the United States and other countries such as India and China; the extra demand for oil has put enormous pressure on available oil reserves. The Energy Information Administration stated, “If refinery or pipeline and/or reductions in imports cause supplies to decline unexpectedly, gasoline inventories (stocks) may drop rapidly. This may cause wholesalers to bid higher for available supply over concern that future supplies may not be adequate” (Energy Information Administration, 2008, para. 9). With this in mind, the other underlying factors that affect supply are disruption to supply or threat of disruption to supply along with The Organization of Petroleum Exporting Countries (OPEC). The Organization of Petroleum Exporting Countries is an organization of oil producing countries which produces over 40% of the world’s crude oil and has two-thirds of the world’s oil reserves. This organization was formed in 1960 to regulate the supply of oil and to some extent, the price of oil. The organization includes Algeria, Indonesia...
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...THE EFFECT OF ENERGY PRICES ON TRANSPORTATION AND STORAGE SECTOR’S EQUITY RETURNS: THE IRANIAN CASE by ABSTRACT The purpose of this study is to examine the effect of oil and gas prices on transportation and storage sector’s equity returns in Iran. To this end, we analyze Iranian transportation and storage sector index for the period from the first week of January 2005 until the third week of March 2010. Based on the multifactor model and using time-series regression, our findings indicate that oil price is not an important determinant of returns in transportation and storage sector. Similarly, the findings suggest that gas price movements do not seem to play a role for transportation and storage sector. However, consistent with the capital asset pricing model (CAPM), the market portfolio is a significant pricing factor in the sector’s stock returns. In addition, the estimated regression indicates that the exchange rate is not priced for this sector’s stock returns. The results of this study help domestic and potential foreign investors to understand the effect of energy price changes on transportation and storage sector stock returns in order to manage their portfolio effectively. KEYWORDS Energy prices, Transportation and storage sector, Equity returns, Iran INTRODUCTION Recent years have witnessed massive price movements of the energy markets. The price of energy has a large impact on economy of the world (Huang et al., 1996; Nandha & Brooks, 2009; Chen et al., 1986; Nandha...
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...“ Investigate the extent of competition in the natural gas industry in the European Union. Assess the impact of EU and national regulations on the prices of natural gas across the EU”. Abstract: European natural gas market currently has a decline of indigenous resources that is, at the same time, combined with the growing dependence of gas supplies coming from a few foreign exporters. As a result of this, new EU regulations and polices are proposed. This paper will analyze the past gas reforms and will try to assess the impact of those regulations on prices for natural gas and also investigate the competition of the EU natural gas market. The empirical analysis will focus on reform indicators such as vertical integration and market structure of the natural gas market, in order to show how these indicators are related to prices. By Kirill Osaulenko Content 1.0 Introduction ……………………………………………………..3 2.0 Literature Review ……………………………………………….3 2.1 The Structure Of the Gas Market in Europe ………………...3 2.2 How competitive is the natural gas market in Europe ……....4 2.3 Liberalization process across Europe………………………..5 2.4 Existing Empirical Evidence in the Academic Literature …..7 2.5 Summary of the review……………………………………...9 3.0 Competition in the EU gas Market …………………………….10 3.1 Wholesale Market ………………………………………….11 3.2 Production Market …………………………………………12 ...
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...Why Gas Prices are higher in California than in other Parts of US English 123 James L Hicks Embry Riddle Aeronautical University Abstract The rising gasoline and oil prices have become a global concern since petroleum has many uses around the world and yet its prices have continued rising for the last sixty years. This paper sought to find out why gas prices are higher in California than in other parts of America. The literature reviewed showed that West gasoline market dominated by California is defined by tight balance between supply and demand. Other factors found to be contributing the escalating gas price in California include isolation of the state from other refining centers, market conditions including international demand, Wall Street speculation, poor policies leading to uncontrolled oil cartels, decline of oil production during technical failure, political interferences, and increasing prices of crude oil due to demand forces. Despite there being no quick solution to the challenge, temporary measures such as efficient use of the available resource while looking for alternative cheaper source of energy could alleviate the challenge. Why Gas Prices are Higher in California than in Other Parts of US The Rising gasoline and oil prices have today become a world concern (Garrington, 2012). More concerns are raised considering that petroleum is an important product whose price continues escalating for the last sixty...
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...u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / e n e c o Economic impacts of higher oil and gas prices The role of international trade for Germany Christian Lutz a,⁎, Bernd Meyer a,b a b Institute for Economic Structures Research (GWS), Osnabrueck, Germany University of Osnabrueck, Germany a r t i c l e i n f o a b s t r a c t The analysis concentrates on direct and indirect price increases, induced shifts in international trade and structural changes in the oil importing economies. The paper at hand asks, whether a stabilizing effect via international trade and domestic structural change on the GDP of oil importing countries can be observed, if a permanent oil price increase occurs. At least for Germany, structural change from consumer goods to investment goods industry and an improvement of international competitiveness limit negative impacts of increased energy prices. Analysis is based on the extensive and disaggregated global GINFORS model and the detailed INFORGE model for the German economy. © 2009 Elsevier B.V. All rights reserved. Article history: Received 15 July 2008 Received in revised form 13 January 2009 Accepted 27 May 2009 Available online 6 June 2009 JEL classification: Q43 C53 C67 F17 Keywords: Global modelling Energy prices and the macro economy International trade 1. Introduction Oil price shocks have negative impacts on oil importing countries. There seems to be evidence for this plausible result from the literature...
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...Substitution and Income Effects Paper Bus 640 Managerial Economics Kiva Fowlkes Dr. Magadalena Cutler October 24, 2011 Introduction Consumer Behavior is how consumers allocate their money incomes among goods and services. Each consumer has preferences for certain of the goods and services that are available in the market. Buyers also have a good idea of how much marginal utility they will get from successive units of the various products they might purchase. However, the amount of marginal & total utility that the people will get will be different for every individual in the group because all individuals have different taste and preferences. According to Maurice & Thomas (2011) “marginal utility is an additional or incremental utility. Marginal utility is defined as the change in the total utility that results from unit one unit change in consumption of the commodity within a given period of time”(p. 169). There is an assumption that consumers engage in rational behavior. Therefore one can define a consumer as a rational person, who tries to use his or her money income to derive the greatest amount of satisfaction, or utility, from it. Consumers want to get the most for their money or, to maximize their total utility. Rational behavior also requires that a consumer not spend too much money irrationally by buying tons of items and stock piling them for the future, or starve themselves by buying no food at all. Substitution and Income The income effect describes how...
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... A. Although natural gas is the next step to our clean energy initiative, the lack of regulations on fracking is leading to air and water pollution, droughts and undisclosed chemicals which are used in the process. II. What is the Fracking? A. Fracking is a process to harvest Natural Gases from the earth core. 1. There are two different processes of fracking, Hydraulic and horizontal fracking. 2. Chemicals are released into wells to harvest the gas. B. The current regulations for fracking are left to each state to determine how the process works. 1. A FRAC Act requires the companies to tell what chemicals are used, but there is loophole. 2. EPA is barred from regulating the ground water. III. II. There are two main benefits of fracking; better source of energy and long term quality. A. Natural gas is a better quality of energy for the United States. 1. Natural gas is clean, safe, colorless, shapeless and odorless. 2. Natural gases burn at lower temperatures so they last longer. B. With Natural gases the dependency on foreign oils will decrease. 1. The price of oil is on the rise. 2. Natural gases are harvested in the United States. IV. III. Although the benefits of natural gas are extremely affective, the effects of the process to harvest the gas is extremely damaging...
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...Salifu SAPAD133 Economics (ECF1110D) The Oil and Gas sector includes the oil and gas extraction industry as well as petroleum refining. The United States is the world's third-largest petroleum producer, with more than 500,000 producing wells and approximately 4,000 oil and natural gas platforms operating in U.S. waters. Together, oil and gas supply 65 percent of U.S. energy. The nation's 144 refineries process more than 17 million barrels of crude oil every day. Oil and gas production facilities include 16,000 establishments with a value of shipments of $134 billion. Natural gas is seen as a good source of electricity supply for a number of economic, operational and environmental reasons: it is low-risk (technically and financially); lower carbon relative to other fossil fuels; and gas plants can be built relatively quickly in around two years, unlike nuclear facilities, which can take much longer. (“Oil and Gas”, n.d.) Oil prices have risen while natural gas prices have soared. Using the supply and demand models, this essay analyzes the change in price from an economic point of view. The price of oil rose 1 percent Thursday as stockpiles declined and new indications that demand is rising in the U.S., the world's largest crude consumer. The price of natural gas soared nearly 5 percent to close at $4.46 per thousand cubic feet — the highest price since July of 2011 — after the government reported a huge draw in supplies,...
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...Economic Profile on the Oil and Gas Industry The oil and gas industry is one of the most talked about industries today, at least in my town it is. Everywhere I go I hear people talking about the rise or fall in gas prices or how the cost of a barrel of crude oil has just gone up or down .10 cents. I also hear about how the current hurricane season could pose a threat to the oil industry, as it did last year with hurricane Katrina, putting oil refineries under water or causing extreme damage to them. In this essay I am going to discuss the shifts and price elasticity of supply and demand in the oil and gas industry. I am also going to discuss the oil and gas industry’s positive and negative externalities, wage inequality, and monetary and fiscal policies. Lastly, I will discuss the economic affects and influence on the oil and gas industry. Shifts and Price Elasticity of Supply and Demand The price elasticity is the affect of the price for a good on the demand of that good. If consumers are not affected by the change in price then this good would be referred to as inelastic. If consumers are affected by the change in price then this good would be referred to as elastic. The oil and gas industry is inelastic when the prices rise because, although consumers slightly reduce their consumption of oil and gas, consumers still purchase oil and gas. With gasoline prices in the U.S. approaching an average $3 a gallon, Americans are moaning about the rising cost, but so far they are...
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...Arizona’s Gas Pipeline— it’s effects on the Economy Having severe damage to the gas pipeline that supply Arizona with gas, caused the pipeline to shut down over a couple of weeks, thus creating a sellers market and consequently gas prices sky rocketed. Since there was very little gas to go around for consumers to fill up their tanks, gas stations weren’t profiting as much by hiking up the prices— as the quantity was far less, even though the consumers ended up paying for outrageous prices at the pump. As per the old rule of supply-and-demand when a product is scarce and there is a lot of demand, sellers have the luxury of increasing the purchase price onto the buyers, leading to a change in the equilibrium price, and the quantity in which drivers will fill their tanks. Because the gas was hard to come by, it made drivers think twice how far they will drive. When the gas companies stop the normal deliveries of gas to the gas stations, gas stations started to run low on fuel, again gas prices went up, and this worry many head of households who now had to take into consideration whether that family vacation will be taken by car or by plane. Although there was a higher demand for gas the amount people were willing to pay to get their vehicles filled up never change, primarily because people still needed gas. The temporary blockade of gas did however, shifted the supply curved to the left, and leaves the demand curve about the same. The equilibrium price of gas does change as...
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...STEP 1 | Identify | Low Oil Price In Malaysia | STEP 2 | Dissect | 1. Definition of oil and gas 2. The cause to low oil price 3. The impacts of low oil price to Malaysia economy 4. To know about the advantages and disadvantages of low oil price | STEP 3 | Select | Impacts of low oil price in Malaysia | STEP 5 | Formulate objectives | Main objective is to determine the impact of low oil price in Malaysia Specific objectives: 1. To determine the effect low oil price on people economy 2. To determine whether oil price has long term effect or short term effect on economy | STEP 4 | Raise question | 1. What are the impacts of low oil price on nation economy 2. How does the oil price affect people economy 3. Is oil price has long term effect or short term effect on economy? | SEVEN-STEP APPROACH STEP 6 | Make sure | Assess the objectives in Step 5 in terms of: 1. The work involved: * Find out 5 articles in the internet * Find other related topic from internet such as definition of oil and gas , the cause of oil and gas and to know about the advantages and disadvantages of oil and gas 2. The time available * I did the research after class finish and completed the task given usually at night 3. The financial resources at disposal * I spend my money to print out the report and for references I just took from internet and library. There is no cost for references. 4. Knowledge and expertise in the areaMy major...
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...Higher gas prices should lower demand. How do you evaluate this statement? One would think this statement to be true, but as gas prices rise, the demand for the gas does not change. Consumers still are in demand for the fuel due to traveling, commuting to work and school, etc. Also, in this day and age I feel consumers will pay higher gas prices due to the preference of wanting to drive their own vehicles then partaking in public transportation. Certain consumers are preparing in advance for the spike in gas prices by purchasing a vehicle that is fuel efficient, while others pay no mind to the rising prices. What are the three reasons that law demand exists. Explain. The three laws of demand are diminishing marginal utility, income effect and substitution effect. Diminishing utility- Is described as, the more a consumer purchases an item, and their satisfaction will deteriorate over time. For example, I have a love of racing RC cars, as I buy more I become less satisfied because what I thought would be a better RC car turns out to be false. This causes me not being satisfied and my fulfilment of racing is not complete. Income effect- Is the effect of a change in income, either directly or indirectly, changing the assumption of goods. For example, when a consumer has to change their cable package to a lower level due to a decrease in income, where before they had more than enough income to afford a $300 cable package that includes numerous extras. Substitution...
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