Applied Economics for Managers

Running head: APPLIED ECONOMICS FOR MANAGERS
Applied Economics for Managers
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APPLIED ECONOMICS FOR MANAGERS1
Table of Contents
Step 2: Supply and demand graph...................................................................................................2
Potential supply and demand risk in the global oil market..........................................................2
Step 4: Pricing strategies.................................................................................................................3
Step 5: Executive summary.............................................................................................................4
References........................................................................................................................................5

APPLIED ECONOMICS FOR MANAGERS2
Step 2: Supply and demand graph
The structure of market depends on degree of competition in the market which in turn
determined by the number of buyers and sellers. The four common market structures are perfect
competition, monopoly, monopolistic competition and oligopoly (Cowell, 2018) The oil and gas
industry in which ExxonMobil operates is an oligopoly market. Oligopoly market is considered
as a market structure where small number of firms enjoy significant market power. Because of
acquisition in the industry, the market is dominated by four largest companies. These are
ExxonMobil, ConocoPhillips, Chevron and Marathon (news.exxonmobil.com., 2019). The big
four companies hold approximately 80 percent market share in the industry. Among these
companies, ExxonMobil holds the largest share with share being approximately 41 percent.
Potential supply and demand risk in the global oil market
Demand and supply risk are real risks to the oil and gas companies. Financial crisis and
other macroeconomic factors are the source of potential risks to the global oil market. The
current global economic condition suggests that global oil market is likely to undergone a U turn.
The supply side risks originate from likely fear that of production cut by OPEC and sanction of
United State against the producers of Iran and Venezuela. On the demand side, the likely risk has
been realized in terms of slowing global consumption and possibility of global recession. The
weak economic growth in the global economy has built up lower expectation of global oil
demand (Gloystein & Varghese, 2019). The global demand has been forecasted to be slow down
due to trade disputes between China and USA. The trade war between US and China is likely to
trigger an economic recession in the global economy. Global demand and supply of oil therefore
now are facing potential risk of a downward movement causing oil prices to move downward as
well.