...500B Economics for Decision-making Final Research Paper: Oil industry Forecast Background The United States is one of the largest oil reserves’ country in the world. And its proven oil reserves was 227 billion barrels, ranked 11 in the world. More than 80 percent of the country's oil reserves are concentrated in four states: Texas (24 percent), Alaska (22 percent), Louisiana State (20 percent) and California (19%). Today, the oil industry is the largest industry in the world and accounts for over $3 trillion dollars in annual sales. Between 1950 and 1973 the world oil industry grew 9-fold – a rate of increase of 10% per year, sustained over a period of 20 years. During that time period, the world produced over 2.5 billion new motor vehicles, half of which in the United States. The five largest producers of oil are Saudi Arabia (10.37 mbd), Russia (9.27), United States (8.69), Iran (4.09) and Mexico (3.86). And now, International instability and rising demand have severely impacted prices, which reached an all-time high of over $70 per barrel earlier this year. Both domestic and foreign oil producers are relishing in high prices by posting record profits. The growing trade imbalance in favor of oil producing nations jeopardizes American long-term economic health. The current level of US national debt – $8.3 trillion – coupled with the Iraq War places the US in an extremely vulnerable position. Finally, unmentioned as of yet, is the rising threat of global warming...
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...volatility in the Global oil and gas market 1.Introduction “Oil is the life blood of civilization. It fuels the vast majority of the world’s mechanized transportation equipment – automobiles, trucks, trains ships, farm equipment, the military, etc. oil is also the primary feedstock for many of the chemicals that are essential to modern life”(Hirsch et al. 2005:2). It can be said that; there cannot be economic growth without oil, therefore oil is crucial to the world economy, and change in prices would definitely have a knock on effect on the world economy, the oil market is complex, very volatile and it’s capital intensive (Sharma 1998:2). “Oil Prices have exhibited unprecedented volatility in recent months , prices rose from 2004 to historic highs in mid -2008 and only to fall in the last four months of 2008” (kojima 2009:9). Economic growth in the United States of America (USA) and the emerging new markets between 2004 and 2008 gave rise to demand for oil and high-rise in the price of oil. This high volatility of prices has led governments and institutions to intervene in the oil market. This coursework aims at showing the impact of oil price volatility in the global market; it also examines the various roles played by governments, financial institutions and The Organisation of Petroleum Exporting Countries (OPEC) in stabilizing and managing the risk, and the remote causes of price volatility. Government intervention in the oil and gas market is due to...
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...Project: CHAPTER ONE 1.0 INTRODUCTION 1.1 BACKGROUND Economics is the management of scarce resources. Scarcity is a universal phenomenon. It is the scarcity which is basic economic problem not the shortage. Shortage could be overcome by taking different short run and long run measures, but scarcity is a permanent phenomenon. All countries in the world are facing this problem and in less developed countries the situation is specially worsen because of the availability of limited resources. There are so many problem faced by developing countries like poverty and unemployment, which puts negative 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...
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...Since the 1973 oil price shock, the history and behaviour of the Organization of Petroleum Exporting Countries (OPEC) have received considerable attention both in the academic literature and in the media. Many conflicting theoretical and empirical interpretations about the nature of OPEC and its influence on world oil markets have been proposed. The debate is not centred on whether OPEC restricts output, but the reasons behind these restrictions. Others explain production cuts in the 1970s in terms of the transfer of property rights from international oil companies to governments (Johany, 1980; Mead, 1979). Others explain output restrictions in terms of coordinated actions of OPEC members. Within the literature, OPEC behaviour ranges from classic textbook cartel to two block cartel (Hnyilicza and Pindyck, 1976), to clumsy cartel (Adelman, 1980), to dominant firm (Salant, 1976; Mabro, 1991), to loosely co-operating oligopoly, to residual firm monopolist (Adelman, 1982) and most recently to bureaucratic cartel (Smith, 2005). Others have suggested that OPEC oscillates between various positions but always acts as a vacillating federation of producers (see for instance Adelman, 1982; Smith, 2005). The existing empirical evidence has not helped narrow these different views. Griffin’s (1985) observation in the mid-1980s that the empirical studies tend to “reach onto the shelf of economic models to select one, to validate its choice by pointing to selected events not inconsistent...
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...Case Study 1, 2, 3 OIL AND THE ECONOMY WHERE IS ALL THE CURRENCY THE HISTORY OF U.S. GOVERNMENT DEBT Submitted by: Julie Ann G. Ropan Carl Cedric P. Albunian BSBA- Bus. Econ III- A Submmited to: Mrs. Pimeh C. Tolentino PH.D Introduction The large production of oil is originated at the Middle East. Crude oil is one of the inputs of production of many goods and services that much of the world comes from Saudi Arabia, Kuwait, and other Middle East Country that which included in the monopoly. Monopoly is one of the market structures that a firm is a sole seller of product without close substitute. When some event (usually political in origin) reduces the supply of the crude oil flowing from the region, the prices of oil rises around the world. Because they think that it would be much profitable to them. But since the U.S is much affected to the inflation of the oil it is not favourable for them. U.S. firms that produce gasoline, tires, and many other products experience rising cost, and they find it less profitable to supply their output of goods and services at any given price level. The result is a leftward shift in the aggregate-supply curve, which in turn leads t stagflation. The countries with large oil reserves got together as member of OPEC, the Organizational of Petroleum Exporting Countries. OPEC is a cartel—a group of sellers that attempts to thwart competition and reduce production to raise prices. And indeed, oil prices rose substantially. From 1973...
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...IRANIAN OIL AND GAS INDUSTRY COMPETITIVENESS NAME: INSTITUTION: CHAPETR ONE: INTRODUCTION 1.0 Introduction This study’s rationale is based on the deductions from the available literature that there is a dire need to understand the Oil and gas industry competitiveness in Iran (Michael E. P. 1990). This study thus uses Porter’s model of competitive advantage of nations to analyze Iran’s oil and gas industry’s competitiveness in the global market. This study will also focus on the factors that affect the industry’s competitiveness. In the past decade, there has been a progressive increase in world oil demand due to increase in the global economic growth (Hooman 2000), (Narsi, 2001). With the global demand for energy projected to rise in the future coupled with the exponential reduction in oil reserve discovery from the majority of non-OPEC (Organization of Petroleum Exporting Countries) countries, there is a significant demand for oil from OPEC countries, such as Iran. Moreover, unless there is a feasible alternative, the influence of Iran and other OPEC countries will be more prevalent. This, therefore, means that the energy sector in OPEC countries faces fierce competition (Fereidun 2016). Iran is the oldest oil-exporting country in the Persian Gulf region. With the continued discoveries of new oil fields, its current reserves have exceeded domestic consumption and exports. Being the founding member of the OPEC, Iran has also...
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...stabilized, and begun to show signs of recovery. The post-Soviet drop in production stabilized in around 1995, and production was roughly constant for the next few years. By the end of the 1990s, however, new investments were coming into the industry, and production began to trend upward. By 2001, Russian oil production had increased by about 15 percent over two years, and accounted for some 10 percent of world oil production ("Russian Oil Power," 2001). This progress has been due primarily to the application of improved technology, allowing further recovery from wells and fields that by Soviet-era technological standards had been regarded as depleted. By 2001, the revitalization of the Russian oil industry was beginning to impinge significantly on world oil markets. The leadership of OPEC underestimated the rate of Russian oil-industry recovery, and thus found itself at risk of being caught short by non-member Russia's actions in its own efforts to control world oil supplies (Whalen, Herrick, and Bahree, 2001). Accentuating the problem, from OPEC's point of view, is that several other major oil exporters, such as Mexico, made it clear that they would not reduce their own oil exports by a...
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...ANVITHA (1226213102) OIL TRADING - SUPPLY AND DEMAND ANALYSIS SUMMARY: Oil, also known as petroleum, is the most actively traded commodity in the world. The price is usually quoted per barrel. Oil trading is transacted on changes in the price of crude oil and does not involve a physical purchase of the commodity. The direction of the price movement determines whether a trader will profit or not. The two kinds of contracts that are traded are oil futures and options. The price of oil can be significantly affected by political factors, as well as environmental factors such as natural disasters. Other influencing factors include demand such as that driven by modernizing populations in India and China, as well as supply - that is, production rates in oil producing countries. In addition, technological advances in alternative energies may also affect the price of oil. In short, oil trading can involve significant price fluctuations making it an exciting and potentially profitable market. Oil prices also affect currency trading. Sometimes, a weakened US dollar may cause a rise in the price of oil. Other currencies that rely on commodity prices, such as CAD can also be affected by changes in oil prices. In this report we are analyzing the demand and supply , price factors of crude oil. INTRODUCTION: Until as recently as the early 1970s, the main channel for oil supply was the integrated system of the major oil companies. Each company had its own source of crude oil supply as well as...
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...BC607 Assignment 7.1 Oil Producers vs. Oil Users Oil is a unique and finite commodity. Every person in the world is affected by oil and it plays a vital role within modern society. It has also been associated with conflict since the First World War. The importance of oil is such that nationals and ethnic groups are prepared to go to war for this commodity if necessary. As such, a unique set of economic circumstances and policy issues surround oil. These include oil’s links to industrialization, economic growth, the distribution of wealth, and global warming. Oil is vital to the functioning of the economy of individual countries as well as the global economy. It plays an essential role in transport systems (ground, air and sea), agriculture, chemicals, and the military. Thousands of products are made using oil including plastics, pesticides, paints, inks, synthetic fibers, solvents, medicines, and other vital everyday use products. The reality is that oil is all around us, even when it is not being used in vehicle or other transport engines. Since oil is a finite commodity, concerns about when the supply of oil will decline and run out is of paramount importance and concern. The world’s supply of readily accessible oil is declining simply because more oil is being extracted than being discovered. New technologies that gain access to reservoirs previously hard to access may extend the life of these reserves. However, demand for oil in developed countries such...
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...first question it was a no brainer because I really want to know why our gas prices top the national average. I am going to discuss the factors that affect the prices of gas around the country and focus on the city of Chicago. There is no one factor that contributes to the rise of gas prices. The fluctuation of gas prices can be contributed to a combination of factors. Some of the factors that have been seen throughout my research are the price of crude oil, increase in demand, distribution network breaks, refinery capacity, and taxes. The Oil Producing and Exporting Countries (OPEC) determine how much oil to produce and distribute. OPEC attempts to stabilize the prices of crude oil but the supply has stagnated and the demand has increased. Not to mention that the U. S dollar has lost some value; therefore causing OPEC to raise prices because oil is traded on the World Market in U.S. dollars. There have been a few natural disasters that have affected the prices of oil one recent one was Hurricane Katrina because the oil is refined in the...
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...prices are impacted by a number of factors, each individually placing its own pressure on our overall energy system. Some affect the price of crude oil and others affect the cost of producing and marketing gasoline, but combined, these factors greatly impact the fluctuation of gas prices that we experience on a daily basis. Changes in crude oil prices - Crude oil prices are determined by worldwide supply and demand, with significant influence by the Oil Producing and Exporting Countries (OPEC) as they determine how much oil to produce and sell to other countries. The more crude oil OPEC chooses to produce and release, the lower the price. Additionally, because oil is traded in a world market, events in remote areas affect the price of crude oil for almost everyone. In recent years, worldwide events that have impacted gas prices include: Decisions by the OPEC cartel to raise production quotas slowly and reluctantly after having reduced them in 2002. * An increase in worldwide demand for oil, including unexpected demand growth in China, India, and other quickly developing nations. These nations have experienced a tremendous growth in the number of citizens who have access to automobiles, and their billion-person populations have a strong impact on the amount of crude oil needed in those parts of the world. * Disruptions in oil production in countries that are major exporters, including Venezuela, Iraq and Nigeria. * A decline in the value of the U.S....
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...INDEPTH: OIL The price of oil - in context CBC News Online | April 18, 2006 Oil is sold in barrels - it's the same unit of measure used to sell whisky. A barrel of oil - or whisky - contains 159 litres. The price of a barrel of oil has been testing new highs since it pushed through $50 a barrel in September 2004 - and pushed gasoline prices well beyond $1 a litre in the summer of 2005. But how high are prices like that, historically speaking? Turns out these records may not be records, after all. Oil prices were stable for most of the 100 years before 1973 at well under $5 a barrel. Expressed in today's dollars (all figures in U.S. dollars), the price was closer to $10 a barrel, hitting highs of about $15 and lows close to $8. Even as the world economy boomed in the decades following the Second World War, prices remained fairly stable. That's mainly because the United States held most of the clout in the oil industry - and the U.S. government regulated the price of oil. From 1958 to 1970, prices were stable at about $3 per barrel, but in real terms the price of crude oil declined from above $15 to below $12 per barrel. The decline in the price of crude when adjusted for inflation was further exacerbated in 1971 and 1972 by the weakness of the U.S. dollar. But by the early 1970s, that changed. The Organization of Petroleum Exporting Countries had become a force and in 1973, the first major oil shock hit the world as Arab nations refused to sell to countries that...
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...Daniel Sebagh Dr. Armiger Response paper #2 4/26/12 Oil Crisis in the 1970’s The Oil Crisis of the 1970’s was a major period in American history, when a number of political, global and social events came together to create a ‘perfect storm’. The Seventies was an era filled with people seeking self-fulfillment (The ‘Me’ Decade), where the nation was growing at a fast pace. People, during this time, concentrated on their own leisure and happiness. Behind the narcissism and selfishness of many people’s attitudes, an oil crisis struck America which largely impacted the automobile industry and led to a rise in gas prices. The combination of stagnant growth and price inflation during this era raises many issues, while many attempts to end the crisis, such as Jimmy Carter’s Energy plan, substantially made it worse. These problems caused Americans to focus more on economic issues versus social issues. The “Me Decade,” a term coined by novelist Tom Wolfe, was a concept of the Seventies- “an era of narcissism, selfishness, personal rather than political awareness… The ‘70’s was the decade in which people put emphasis on the skin, on the surface, rather than on the roof of things… It was the decade in which image became preeminent because nothing deeper was going on (Schulman, 145).” It described the new American self-awareness and the collective retreat from history, community and human reciprocity. Compared to the 1960’s, Americans in the 1970’s were self-absorbed and passive;...
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...The combination of the price of crude oil and the cost of producing and marketing gasoline have greatly impacted the fluctuation of gas prices that we experience on a daily basis. Crude oil prices are determined by worldwide supply and demand, with significant influence by the Oil Producing and Exporting Countries (OPEC) as they determine how much oil to produce and sell to other countries. The more crude oil OPEC chooses to produce and release, the lower the price. With an increase in worldwide demand for oil, including unexpected demand growth in China, India, and other fast developing nations. These nations have experienced a tremendous growth in the number of citizens who have access to automobiles, and their billion-person populations have a strong impact on the amount of crude oil needed in those parts of the world. Seasonal changes can have a serious impact on gas prices as well. Gas prices increase greatly during the summer and holiday seasons because American’s travel increases during these times. For example, the American gas demand increases by 5% in the summer season, resulting in higher gas prices during these times. The decline in the value of the U.S. dollar which is the currency in which oil is traded in the world market is also responsible for fluctuations of gas prices. The United States is the biggest oil consumer in the world with about 53% of its crude oil imported from other countries. The political, Economic, and or social crises in other...
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...wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession. Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis events can often trigger the onset of a recession. The global recession of 2008-2009 brought a great amount of attention to the risky investment strategies used by many large financial institutions, along with the truly global nature of the financial system. As a result of such a wide-spread global recession, the economies of virtually all the world's developed and developing nations suffered extreme set-backs and numerous government policies were implemented to help prevent a similar future financial crisis. A recession generally lasts from six to 18 months, and interest rates usually fall in during these months to stimulate the economy by offering cheap rates at which to borrow money. The sharp decline in economic activity during the late 2000s, which is generally considered the largest downturn since the Great Depression. The term “Great Recession” applies to both the U.S. recession – officially lasting from December 2007 to June 2009 – and the ensuing global recession in 2009. The economic slump began when the U.S. housing market went from boom to bust and large amounts of mortgage-backed...
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