Nobody downloaded yet

Analysis of the Business Environment - Oil Prices - Coursework Example

Comments (0) Cite this document
Title: OIL PRICES Name Tutor 28.12.2011 Introduction In recent years there has been a big debate over movement in oil prices, with the debate centering on whether oil prices are being driven by speculative financial investment rather than fundamentals. The study has been covered by numerous researches and has generated considerable controversy…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.5% of users find it useful
Analysis of the Business Environment - Oil Prices
Read TextPreview

Extract of sample "Analysis of the Business Environment - Oil Prices"

Download file to see previous pages There are a number of intrinsic features of oil supply and demand that are significant to any study of crude oil price instability. Important features encompass competing price and income elasticity, a bifurcated and complex supply response, variable data quality, single currency prizing and the interaction of multiple refined oil product market with discrete elasticity of supply and demand. Consequently they do have a shock on elasticity of supply and demand and can have an impact on the wide-ranging elasticity of the crude oil market (Williams 1996). It is generally understood that OPEC (organization of petroleum exporting counties), has the biggest oil reserves in the world, and is accountable for most of the supply and pricing of petroleum products. OPEC is a permanent intergovernmental organization which at present consists of 12 oil producing and exporting countries, as members spread across three continents of America, Asia and Africa (Taylor 2006). The 12 member’s states of OPEC are: Algeria, UAE, Angola, Qatar, Ecuador, Kuwait, Iraq, Libya, Nigeria, Saudi Arabia and the Islamic Republic of Iran. Causes of Short Run Price Movement of Oil Global oil prices have more than tripled since the year 2003, and volatility has become the rule rather than the expectation. The market price of oil is volatile in the short run. This is because of the following causes: 1. The price elasticity of supply The price elasticity of supply is a measure used to measure the connection between the change in quantity supplied and change in price (Kellick 1995). If supply is elastic, producers can raise output without rise in cost or time delay. If supply is inelastic, firms find it hard to alter production in a given period of time. The price elasticity of supply is equated to the Percentage change in quantity supplied divided by the percentage change in price When the result of this is: More than one, then supply is elastic, Less than one then supply is price inelastic, Zero, then supply is preferably inelastic and When the result is infinity supply is perfectible elastic following a change in demand. Factors That Affect Price Elasticity of Supply of Oil Several factors affect the price elasticity of supply of oil, these are: a) The spare production capacity- the spare production capacity of oil have reduced over the years, this has been one of the major reason for the rapid increase in the prices of crude oil. When there is spare capacity, businesses can expand output easily to meet rising demand pressure on cost (Wakeford, 2010). However, when this spare capacity lacks then the business cannot be able to increase production and would mean that the high prices will persist due to the scarceness of the commodity (Clo, 2000). b) The period involved in the production process – when supply is more price elastic the longer the time period that a firm is permissible to adjust its production levels. In some markets for example in agricultural markets, the quick supply is fixed and is determined generally by planting decision made mouths before, and also the climatic condition, which have an effect on the overall production (Gibbs 2010). c) Factors substitution possibility-when factors substitution is achievable at low cost, then supply will be elastic. When factors are highly specialized as in our case here then ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Analysis of the Business Environment - Oil Prices Coursework”, n.d.)
Analysis of the Business Environment - Oil Prices Coursework. Retrieved from
(Analysis of the Business Environment - Oil Prices Coursework)
Analysis of the Business Environment - Oil Prices Coursework.
“Analysis of the Business Environment - Oil Prices Coursework”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Analysis of the Business Environment - Oil Prices

Oil And Food Commodities Prices. Oil prices effect on agricultural commodity prices in Latin American Nations

...on the agricultural food prices not only in Latin America but in the entire globe. References Abdel, H.A., Arshad, F.M., 2008. The impact of petroleum prices on vegetable oils prices: evidence from cointegration tests. Paper presented at the International Borneo Business Conference on Global Changes, Malaysia, December 2008. Chen, S.T., Kuo, H.I., Chen, C.C., 2010. Modeling the relationship between the oil price and global food prices. Applied Energy 87, 2517–2525. Esmaeili, A., & Shokoohi. (2011). Assessing the effect of oil price on world food prices:...
18 Pages(4500 words)Term Paper

Rising Oil Prices

...Rising Oil Prices: Benefits amidst Rapid Fuel Inflations OBJECTIVE: To show how the rising oil prices contributed beneficially to some areas like the environment, road congestion, and energy conservation. METHODS: Data gathering from current news as well as other research articles published by scholars relating to the issue of rising fuel prices. This paper will provide discussion of the causes and initial impacts of the rise of fuel in the world market and economy as well as on low-income households. RESULTS: The rising oil prices do not affect the world economy in a macroeconomic stance but the negative...
6 Pages(1500 words)Research Proposal

Relationship Between Crude Oil And Natural Gas Prices

...RELATIONSHIP BETWEEN CRUDE OIL AND NATURAL GAS PRICES This paper examines the relationship between crude oil and natural gas prices. The prices of natural gas and crude behave much as any other commodity experiencing wide price swings in times of shortage or oversupply. The paper tests data from 1985-2000 using regression analysis to substantiate the relationship between the two commodities and further throws light on the reasons for deviation of natural gas prices from crude oil prices. Factors affecting demand and supply of crude oil and natural gas...
20 Pages(5000 words)Essay

Crude oil prices

...Running head: Research Methods: Price of Gas in USA Research Methods: Price of Gas in USA s Solution to the problem is found out by research in a scientific approach. To find a solution to the problem by research requires identifying and analysing the nature of the problem and experimenting with the new methods to find a solution. The first step to research is to select the basic method by which the problem can be identified and analysed. The present study is to find out the causes for the disproportionate escalation of the price of gasoline than the price per barrel of crude oil and its effects on consumers. Methods of research: The aim of selecting any...
2 Pages(500 words)Essay

Oil Prices

...recessions. However, the recent past does not fit this view-oil prices are about 2 1/2 times their 2002 levels-but this increase has seemingly not had much impact on the global economy. This seeming puzzle has brought attention to the need to identify the sources of the oil price increase, in particular, to distinguish the role of supply and demand reasons. [1] This box examines these issues using an extended version of the Global Economy Model (GEM) to analyze the causes and outcomes of changes in oil prices. It also looks at the global macro-economic impact of higher taxes on petroleum products. It is important to this clear this from...
8 Pages(2000 words)Essay

Oil Prices Essay

...Business Economics Use supply and demand economic theory to explain why the real price of oil is currently so high. All diagrams are the courtesy of The issue at hand is the reason behind the growing real price of oil. Oil prices have recently crossed the $90 a barrel threshold and although one of the reasons is the dollar's falling exchange rate there are other reasons like inflation and demand and supply factors. The diagram below shows the predicted oil increase in the coming months. Crude...
5 Pages(1250 words)Essay

Subprime Crisis and Oil Prices

...On a wider scale, the effects of high oil prices are pretty general, with much of such passed on to the consumers. According to the Energy Information Administration (EIA 2008), when the prices of petroleum products increase, consumers are forced to use their money on oil-derived products, effectively lessening their money allotted to other goods and services which are also important in their daily lives. And since oil is used for transportation businesses of all types, the cost of input increases. If such cost increases cannot be passed to a company's consumers, it may cause worker layoffs and halting of the plant operations, thus...
10 Pages(2500 words)Essay

Oil and Gas Prices

...29 January 2009 from Crude Oil Prices Jump after Russia-Georgia conflict (12 August 2008) Oil Voice. Retrieved 29 January 2009 from Dunning, T. & Wirpsa, L. (2004) Oil and the Political Economy of Conflict in Colombia and Beyond: A Linkages Approach. Santa Fe Institute. Retrieved 29 January 2009 from Iranian Nuclear Issue Causes Oil Prices to Fluctuate. (24 August 2006) International...
6 Pages(1500 words)Essay

Jehovah Witnessess feelings about receiving blood and how it should be handled with a minor child in a life or death situation

10 Pages(2500 words)Research Paper

Crude oil prices

...of better terms of trade in the future. As mentioned above, the artificially crafted demand has pushed the prices of the commodity to the floor. Again, it is imperative to point out that experts are warning that should this trend continues, many producers, especially the small scale dealers, are likely to be pushed out of the business. This is basically because the small companies cannot effectively apply such strategies of buying buffer stock when the prices are favorable. Smuggling and other illegalities in the market Lastly, another possible factor for the declining oil prices is the presence of a large number of smugglers, illegal dealers and...
3 Pages(750 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Coursework on topic Analysis of the Business Environment - Oil Prices for FREE!

Contact Us