INTRODUCTION.....................................................................................................................................3Effect of higher oil price.....................................................................................................................3Theoretical demand and supply analysis...........................................................................................4Applied demand and supply analysis.................................................................................................6Forward looking analysis...................................................................................................................9CONCLUSION.......................................................................................................................................10REFRENCES..........................................................................................................................................11
INTRODUCTIONIncrease in price of oil have a wide impact on demand and supply. on 18th May, 1987;price of oil was 18.55 and on 24 September 2018; it increase up-to 80.89 which had wideimpact on its demand as well as supply (Liu, Ji, and Fan, 2013). But suddenly in 2008, cost ofoil got much higher and was 143.95. Then on 22nd to 26th December, it again gets fallen up-to33.73 and then after, it get higher. After some duration, in the mid of 2011, price againenhanced and remained same till 2012 but now in 2018 it had finally got normal but notlike1987. Below mentioned assignment is based on oil market analysis and it is throwinglight on effect of higher oil price ( Du, Cindy and Hayes, 2011). Along with this, assist inanalysing its demand and supply on the basis of different factors which is affecting becauseof increasing price. Moreover, in 2008 price of oil decrease and its effect is explained belowin detail.Effect of higher oil priceThe overall economy of nation got affected because of increase in price of oil whichtook place between 1988 to 2018. It had a wide impact on airlines, oil producing companies,solar panel producer and the customersas well(Kilian and Murphy, 2012). Description of thisis givenbelow :- Airlines – Increase in the price of oil have a strong impact on profitability of airlinesindustry.Now a days, the aviation industry have become fuel efficinet and are able tocope up with the higher oil prices very easily. Airlines generally implement hedgingas a tool to protect the industry from the unpredicted fuel price fluctions.
Oil producing companies – Demand of oil is inelastic, thus for the oil producingcompanies increase in price is good news because it will result in enhancing theirrevenue.Solar panel producer – Share price of solar companies are closely related with the cost of crude oil (Baumeister and Peersman, 2013). This probably reflects the capital market belief that the demand for solar electricity is mainly driven by the price of oil. Electricity Prices are more closely linked with natural gas, so that Solar panel producers can be a advantageble source that has not as much affected with higher oil prices.Customers – Higher oil prices will have a negative impact because they have to facehigher transportation cost. But in compensation of this, their income is not rising.Theoretical demand and supply analysisDemand – Demand in economics is the consumer's desire and ability of purchase anproduct or service (Menapace, Colson, Grebitus and Facendola, 2011). It's the fundamentalforce which drives economic growth as well as expansion. Without demand from customers,no business would ever bother producing anything and even cannot able to generate revenue.Factors that can impact demand of oil around the world :- Below mention aresome factors which affect demand of oil in global market :- Technological innovation – Technological factor has major influence in eachbusiness industry. In oil industry, there can be maximum uncertinity that can beaffected by technological features. Whereas some of the technologies are highlydependable on oil industry so if the demand of these technological innovation hasfluctuate than it will also impacted on the demand of oil industry.
Managerial Economics
Contents INTRODUCTION...........................................................................................................................................3 TASK 1..........................................................................................................................................................3 Describe what happened to oil prices between 1988 and 2018, highlighting different phases..............3 TASK 2..........................................................................................................................................................4 Explain how each of the following economic agents can be affected by the change in the international price of oil................................................................................................................................................4 TASK 3..........................................................................................................................................................5 Explain how each of the following shocks can impact the demand or supply of oil................................5 TASK 4..........................................................................................................................................................7 Use a suitable demand and supply framework, supplemented with research from economic sources..7 TASK 5........................................................................................................................................................10 Use a suitable demand and supply analysis to make your projections for the international price of oil. ...............................................................................................................................................................10 CONCLUSION.............................................................................................................................................11 REFERENCES..............................................................................................................................................12
INTRODUCTION Managerial Economics is an economics discipline. Incorporate economic thoughts and ideas for the study and solutions of business entity and industry management challenges. The application of economic processes of thinking to evaluate industry trends” issues in international business are what management economists is all about. Brent oil is currently trading at 76.29 dollars a barrel, up from 73.16 dollars the prior month. The price has increased by 76.43 percent in the last year(Staples, Malone and Sirrine, 2021).Brent fuel is also referred as London Brent, North Sea Oil, Brent Blend, and Brent gasoline, and it is derived from of the North Sea. It's a lighter petroleum that's somewhat lighter than WTI and sweet due to its low sulphur level, making it excellent for processing gasoline and petrol. The EIA evaluates the many factors that might impact crude oil prices, including actual economic factors and also trade and global economy elements. We examine probable links between each component and crude oil prices by describing the seven major factors that could affect energy markets. TASK 1 Describe what happened to oil prices between 1988 and 2018, highlighting different phases. Brent oil is currently trading at 76.29 dollars a barrel, up from 73.16 dollars the prior month. The price has risen by 76.43 percent in the last year. Brent crude is also referred as London Brent, North Sea Oil, Brent Blend, and Brent petroleum, and it is derived from the North Sea. It's a light petroleum that's somewhat lighter than WTI and pleasant owing to its poor sulphur level, making it excellent for processing gasoline and petrol. Brent crude oil accounts for nearly half of the worldwide crude oil supplies. Brent blend crude is used as a reference for oil transactions all over the world. The ICE stock exchange is where it is exchanged digitally. OPEC's tentative average yearly crude prices for 2021 are 62.031 dollars per barrel. This is a result of the long year's 41.47 US dollars that was just marginally greater than the standard yearly price mostly during 2016 oil crisis. As during corona virus pandemic, a substantial drop in vehicle fuel consumption and weaker future situation resulted in a price drop in 2020. OPEC refers for Oil companies, and Algeria and the United Arab Emirates are members as of June 2021. The goal of the Organization of Petroleum Exporting Countries (OPEC) is to manage the oil policy of its membership(Pamungkas, 2020). It was created in
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