Oil Prices by OPEC and Market Fundamentals - Report Example

Business Economics in the Energy Industry Introduction This paper examines the global energy industry and takes a look to forecast energy prices by the last quarter of this year.... market Structure – the oil industry is an oligopoly.... Other practices include setting the maximum price that the market can bear as producers in oligopolies are price-takers (ability to set the price) especially with oil becoming a diminishing commodity.... There is latent price collusion among the oil producers in which one leading producer can increase its prices at will and then followed by the other producers (opec is an example although its pricing power has weaned recently)....

This research discusses the condition of supply and demand of gasoline in the world market, how the interaction between these economic principles affects the price level for gasoline and how the impact of Hurricane Katrina brought about the dramatic increase in gasoline prices.... It is reported that the calamity has adversely impacted the supply chain from the off-shore rigs in the Gulf Coast, which is the largest source of oil for the domestic market.... Note that a bulk of the aggregate oil output is produced by the Organization of Petroleum Exporting Countries (opec)....

The widespread use of solar cells will shift the employment that is currently in the fossil fuel sector into the solar energy market.... Recent political events and technological breakthroughs have made solar power more attractive as the price of oil rises in the hands of opec.... Recent political events and technological breakthroughs have made solar power more attractive as the price of oil rises in the hands of opec.... The nations that comprise opec control 40 percent of the world's oil and can place enormous economic and political pressure on countries around the world (Kwiatkowski, 2008)....

Another case of supply and demand schedules interesting to analyze is the declining oil prices in the world market at the onset of 2007 (Ghatous 2007).... As the fundamental supply and demand balance remains the key determinant of the new equilibrium price and quantity in the petroleum market, the price increase could be better explained by Graph 1 below. … Assuming an initial equilibrium point E1 with 49 million barrels at $57.... This assumption is derived from the advisory of the Organization of Petroleum Exporting Countries (opec), a powerful cartel of major oil producers, that they would keep current output restrictions in place....

The oil prices were soaring and the sub prime crisis in the United States breaking out globally in august 2007 further worsened the conditions.... The UK economy fared really well as per the market expectations.... Comparing the forecasts made by the market analysts in December 2006 to the actual data available at the end of year 2007, the results are really surprising: the growth was stronger in 2007 than was expected.... The UK economy was able to make significant headway despite harsh market conditions....

The traders of the commodity market who are involved in a future contract with the oil companies determine the oil prices.... The traders who are involved… the price setting business can be classified under two headings, one who represents a company and the other are the speculators whose main motives is to gain profits by regulating the oil prices.... It was observed that the oil prices fell nearly to half of its rate.... The demand and the supply of oil are the essential components responsible for the changes in the oil prices....

Even though the domestic fuel prices in China undergo regulation by the government through the responsible department, the prices are always revised quite often in accordance with the world oil prices and due to that, the diesel prices and the gasoline prices tend to follow or rather comply with the world oil prices.... There are two main oil companies in the State of China namely the China Petrochemical Corporation and the China National Petroleum Corporation are given the mandate to set the ex-plant prices that are the wholesale and retail prices....

In the essay “Allocation of Scarce Resources in a market Mechanism,” the author analyzes the impact of increase consumerism.... To this end, it is found that allocation of the scarce and limited resource base in an economy driven by 'market mechanism' is conditioned on the price quotes obtained through auctions or bids.... The observation made in this regard shows that the government of different countries operating in a market mechanism has made the private sector get a license in relation to oil exploration and land property rights....