Factors That Affect the Market Price of Oil

Factors That Affect the Market Price of Oil THE FACTORS THAT AFFECT THE MARKET PRICE OF A PRODUCT SUCH AS THE WORLD PRICE OF OIL IN THE PAST TWO DECADES. BRIEF: 103737 INTRODUCTION In order to have a good understanding of the factors that affect the market price of a product, one will first need to grasp the meaning of what a market is. A market can be defined as an area over which buyers and sellers negotiate the exchange of some product or related group of products. It must be possible, therefore, for buyers and sellers to communicate with each other and to make meaningful deals over the whole market. Individual markets differ in the degree of competition among the various buyers and sellers. In some cases where the number of buyers and sellers is sufficiently large no one of them will have any appreciable influence on price. This is what is known as a perfectly competitive market. However, for the purposes of this essay we will stick to the concept of a market. Using the table below we will show how the market price of a product (bread) is affected. Demand and supply schedules for eggs and equilibrium price From the table above we can see that the quantity demanded is much higher than the quantity supplied at 110 and 5 and the price is  £0.50. This shows an excess demand of 105. When the quantity demanded is 90 and the amount supplied to the market is 46, we have excess demand of 44 we correspondingly have a market price of 1. However, when the quantity demanded is 77.5 and the quantity supplied is 77.5, the market price for bread is  £1.50. At this point the quantity demanded is the same as the quantity supplied. At such a price consumers wish to buy exactly the same amounts as the producers wish to sell, this is known as the equilibrium price. At prices above  £1.50 the quantity supplied exceeds quantity demanded. Furthermore, the higher the price, the lower the excess of quantity demanded over quantity supplied. The amount by which the quantity demanded exceeds the quantity supplied is called the excess demand, which is defined as quantity demanded minus quantity supplied (qd à ¢â‚¬â€œ qs). This is shown in the last column of the table. Finally, consider prices higher than  £1.50. At these prices consumers wish to buy less than producers wish to sell. Thus, quantity supplied exceeds quantity demanded. Furthermore, the higher the price, the larger the excess of one over the other. In this case there is negative excess demand (qd – qs Now that we have understood the factors that affect the market price of a product, we can now move on to talk about the factors that affect the fluctuations in the price of oil for the past two decades. In 1985, the price of oil (Saudi Arabian Light) was $27.53 per barrel[1] (yearly average). The price of oil during this period was falling, in which in 1986, the Saudi’s abandoned the swing producer role because they had the largest reserves of oil and capacity utilization to stabilize the price of oil when there was a shortage in the world oil market. By 1987, the price of oil had dropped to $16.95. In 1988, it dropped further to $13.27 and $15.62 in 1989. In 1990, Iraq invaded Kuwait in what turned out to be a huge blow to the stable price of oil. The oil price rose to $20.45 per barrel. The major reason for this is that both Iraq and Kuwait were members of OPEC and due to the war there was a shortage of oil in the world oil market which led to an increase in the price of oil. Between 1990 and 1991 America launched operation desert storm, which was to help Kuwait against Iraq. This also contributed to the rise in the price of oil as America is the largest consumer of oil, an d they needed it during the military campaign of operation desert storm. In 1991 and 1992, the price of oil decreased to $16.63 and $17.16 respectively. In 1993, it fell again to $14.95 and $14.74 in 1994. In 1995, the price rose to $16.10, and in 1996 it shot up to $18.52. In 1998, the price initially dropped to $12.21 but shot back up again to $17.25 in 1999. The main reason for this during this period was that there was an Asian economic crisis; the Iraq oil-for-food programme which helped in stabilizing the price of oil in 1998. In 2000, the price of oil leaped to an astounding $26.20. The reason for this was that due to the decline in the price of oil OPEC members decided to cut back production in order to stabilize the price of oil, before it went below the amount various member countries of OPEC will be able to cover the cost of producing oil. In 2001, the price decreased to $22.81, and in the same year (Sept. 11th) there was an attack in the US which destroyed the world trad e centre. In 2002 to 2003, the price of oil rose to $23.74, and $26.78 respectively. This came about due to strong demand growth mainly from countries like China, and India, in which in 2004, the price of oil jumped to an ecstatic $33.64. In the present year of 2005, the monthly average of the price of oil has reached $63 a barrel. However, for reasons to do with accuracy, we have decided not to use 2005 figures since we are still in the year. The following graph represents the trend in the world price of oil over the past two decades. Data source: BP Statistical Review of World Energy, June 2005. On the supply side, the main players in the crude oil market are OPEC, which currently provides about 40 percent of world supply and hold about 70 percent of proven oil reserves, and non-OPEC producers who own the rest. OPEC as the marginal supplier does act like a cartel in most cases, i.e. they collude to restrict the output of oil and raise the price far above their cost. In recent years, its policy has been to balance the market while allowing for an appropriate level of crude oil inventories in consuming nations. Non-OPEC producers, on the other hand, have relatively limited reserves and spare capacity, and generally behave as price takers. Currently, the estimated reserves of OPEC are 890 billion barrels, as opposed to 177 million barrels for non-OPEC members. In the latter years, world events such as the Iran and Iraq war, the Asian economic crisis, the invasion of Kuwait by Iraq, and corporate social responsibility such as country legislation which regard environmental pollut ion as high on the agenda (in some country’s environmental pollution is stricter than others in order to produce oil, e.g. Nigeria has a less stricter environmental pollution legislation compared to Saudi Arabia) have all contributed to the fluctuations in the world price of oil. However, of recent, the strong demand growth from Asia and China in particular can be said to be the reason why the price of oil is rising. The consumption of oil in 2004 grew by 2.9 million barrels a day (mbd) (3.7 percent of which China contributed about 1 mbd) relative to 2003, which can be said to be the largest increase in the past 20 years. With notable exceptions of Iraq, Russia, and Saudi Arabia, the world’s oil producers may be close to their short-run output capacity. Thereby, continuing increases in demand and the possibility of even minor disruptions (Hurricane Katrina (US), Industrial disputes (Nigeria), environmental concerns (Nigeria)) in supply thus help in explaining the high market price for oil. Investment in refining capacity has been too low, and a mismatch has emerged between the type of refining capacity now required and what is available. For sometime, world oil demand has been driven by high-quality light crude (oil of low density or containing a low wax content, which makes production and refining easier) and by sweet crude (oil with a low sulphur content). Recent additions to production capacity by OPEC have though largely been in the heavy and sour grades of crude, which are more difficult and costly to refine. This lack of investment in appropriate refining capacity and limited substitution possibilities has pushed the retail price of oil up. Another reason which can be said to this lack of investment by OPEC members is a price collapse. When demand falls and the quotas allocated to member OPEC countries breaks down, the price can drop dramatically. For example, in 1997, OPEC raised its production ceiling by 2.5 million barrels per day in ant icipation of growing Asian demand, but the currency crisis of late 1997 instead caused Asian demand to fall. The result was a market price in 1998 that dipped to as low as $12.21 per barrel, the lowest level since 1973, and a $51 billion year over year reduction in oil revenue. In addition given continued uncertainty over the pace of China’s economic development, OPEC may be cautious in expanding supply capabilities due to this. This uncertainty of slow or minimal investment contributes to high futures prices for oil delivery several years ahead. One should also note that since 1986, most oil exporting countries have been burning more oil than they have discovered and since 1998, there has been a fragile balance between supply and demand. Oil is being found at a lower rate than what has been consumed, i.e. we are finding reserves at 7 billion while consuming oil at 30 billion barrels per annum (Exxon-Mobil estimates), hence the law of price adjustment and equilibrium can be s aid to have taken place. SUMMARY AND CONCLUSION This paper has looked at the definition of what a market is. We have also mentioned the concepts of demand and supply with regards to equilibrium and the law of price adjustment. The erratic movement in the price of oil in the past two decades are also looked at. Issues of what factors cause fluctuations in the price of oil such as, the lack of investment by various OPEC member countries into oil production so as to keep up with the world demand of oil, the increasing demand of oil from Asia and the Peoples Republic of China, and the uncertainty of the oil market are all mentioned. It will be worthwhile to conclude that although at present these factors seem to be the norm that affects the price of oil, one should be more cautious into the future, as with hindsight these factors could become obsolete with time passing by. Potential factors which could turn out to be embedded in the future range from alternative sources of energy to synthetic fuels, in which in the long term the demand of oil will continue to exceed supply until the previous mentioned becomes entrenched in most economies. BIBLIOGRAPHY Asian Development Outlook, (2005), The challenge of higher oil prices. BP Statistical Review of World Energy, (2005), Putting energy in the spotlight. Berkmen, P., Ouliaris, S., and Samiei, H., (2005), The structure of the oil market and causes of high prices, research department, International Monetary Fund. Chrystal, K.A., and Lipsey, R.G., (2004), Economics, Tenth Edition, Oxford printing press. International Energy Agency, (2004), Analysis of the impact of high oil prices on the Global economy. www.iea.org/textbase/papers/2004/high_oil_prices.pdf. International Monetary Agency, (2004), Analysis of the impact of high oil prices on the global economy, research department, December. Saxton, J., (2005), Explaining the high price of oil, Joint Economic Committee, Research Report, United States Congress. Serrapere, J., (2005), Crude Oil – Energy and Market Outlook, September. APPENDICES Source: BP Statistical review data 2005 The following table since 1999 shows that there has been no ‘Real’ excess oil supply. Estimated Annual World Oil Demand Growth 2000 – 2005 (million barrels daily) % Change Source: IEA monthly oil report July, 2005. 1 Footnotes [1] The reason we have used US dollars is that it is predominantly used internationally as the currency to benchmark trade.

Principles of Anatomy and Physiology Essay

A tissue is an assemblage of similar cells and cell products performing a specific activity and are located in different organs of the body. Tissues form the building blocks of an organism. They are composed of individual cells which consequently are composed of several organelles. There are four types of tissues in animals and they include the epithelial, muscular, nervous and connective tissue. The images of the various tissue types as viewed under a light microscope have been attached below. The Epithelial tissue covers the body surface and is also the lining for most internal cavities. The skin is an example of an organ made up of this tissue. They are either columnar, squamous or cuboidal in shape. The major functions of epithelial tissue are protection, absorption, filtration and secretion. This tissue is found in the kidney. The connective tissue is responsible for connecting various organs in our body. It is the most widely spread in the body. Examples include fat tissue, blood tissue, and dense fibrous tissue amongst others. The muscle tissue is responsible for muscular movement and coordination. There are three types and they include smooth, skeletal and cardiac muscle tissue. Smooth and cardiac muscle are involuntary meaning they do not require direct commands from the brain. Skeletal muscle on the other hand is under voluntary control and this means that it needs to be commanded on what to do. The nerve tissue is composed of cells that receive and conduct impulses to and from all parts of the body. It’s composed of organelles whose major task is to allow passage and receiving of information. Task 3. There are two classification of cells; prokaryotes and eukaryotes. By classifying under kingdoms, the prokaryote kingdom refers to bacteria while eukaryotes include animals, plants, fungi and protoctista. Eukaryotes are organisms whose cells are in-bound by membranes and a cytoskeleton. They have a ‘true’ nucleus that contains their DNA. The organelles in prokaryotes are not membrane bound. Most happen to be unicellular though some are multicellular. Prokaryotic cells are much older and diverse than eukaryotic cells as they’re believed to have been there for millions of years. The organelles found in both cells perform specific functions and influence the overall task of the tissue. The table below mentions certain organelles, their function and whether they are found in prokaryotes or eukaryotes. Organelle Function Cell Found Golgi Body Transports proteins from the Rough Endoplasmic Reticulum to the cell membrane for export. Eukaryotes. Lysosome Contain digestive enzymes that break down unwanted chemicals toxins or even the entire cell. Eukaryotes. Cell Wall Separates the content of the cell from the outside environment and thus controlling the exit and entry of materials. Offers rigidity to the cell. Mostly found in Prokaryotes. Nucleus Contains DNA that carries the genes of the cell. It’s not membrane bound in prokaryotes or a nucleoid. Both prokaryotes and eukaryotes. Ribosomes Responsible for protein synthesis. In Eukaryotes, they’re larger (80S) while in Prokaryotes, they are smaller (70S) type. Both prokaryotes and eukaryotes. Endoplasmic Reticulum Form a transport highway within the cell allowing movement of molecules. Plays an important role in protein synthesis. Composed of RER and (Smooth endoplasmic reticulum) SER. Eukaryotes. Cytoskeleton Protein fibers extending through cells to offer support, transport and motility. Allows for cytoplasmic streaming. Eukaryotes. Mitochondria Allows for aerobic respiration. Provision of energy through the breakdown of glucose. Eukaryotes. Flagella Responsible for propelling and movement activities. It’s complex in eukaryotes and consists of two protein building blocks. Both prokaryotes and Eukaryotes. Task 4.Different cell components in a tissue influences the function of that tissue. As each has a specific role which it undertakes, the synchrony of these activities enable a tissue to perform the overall specialized task that it is supposed to handle. The number of various cell components will depend on the general function of the tissue. Cell differentiation is the process whereby a less specialized cell becomes more specialized. Differentiation occurs continually in a multicellular organism. It is important as it enables adult cells to give rise to daughter cells which in turn become specialized to perform a certain function. Each type of cell that develops creates tissue-specific proteins only available in that cell type. Cells need to have different structures as they perform different functions. During differentiation, the shape and structure of the cell changes. As stated earlier, the number of certain cell components/organelles in a tissue influences the overall role of the tissue. Take for example mitochondrion; structures that convert food energy into a form that can easily be used by cells. Through respiration, energy is released from glucose and is used for various body processes. Tissues that require large amounts of energy will always have a high number of mitochondrion. An example is the muscle tissue. The energy requirements of voluntary and involuntary muscles is high. This thus creates an energy deficit that is compensated by an increase in the number of mitochondrion in these tissues. Task 5.The muscle tissue is comprised of cells whose purpose is contraction. They contract upon receiving a stimulus by a chemical released at a nerve end known as a neuromuscular junction. All cells contain actin or myosin proteins in their filaments. There are three types of muscle tissue; cardiac, smooth and skeletal and each have their distinct characteristics. In skeletal and cardiac muscles, these filaments contain desmin resulting into refractile bands called cross-striations. Smooth muscle cells however are not highly ordered and thus are not striated. The different types of cells can be distinguished by their appearance as viewed under a microscope. This task will aim at differentiating between smooth muscles and cardiac muscle. The major difference is in the structure, function and location. Skeletal muscle tissue are attached to bones and is responsible for general body movements. They are cylindrical in shape and have voluntary control of activities. They have regularly spaced traverse bands and thus striated. The cells are syncytial; they are multinucleated since myoblasts fuse to make the adult muscle cell. The muscle cell is long and threadlike. The nuclei is rectangular in shape and is located in the periphery of the cell beneath the cell membrane. All muscle tissue is organized into bundles due to wrappings of individual muscle fibers, group muscle fibers and multiple muscle fibers to form a large muscle mass. On the other hand, the cardiac muscle tissue is found in the heart and is under involuntary control; contraction is not consciously controlled. Cardiac fibers form long chain of cells which branch and intertwine resulting into ‘wringing.’ Cells are cylindrical in shape with a central oval nucleus. The nuclei is rectangular in shape. Though cross striations are visible, they are not as prominent as those of skeletal muscle. The cardiac muscles are branched and are joined together by intercalated disks. Striations run across the cells at right angles. Reference Gerard, J. T. & Sandra, R., G. 2000. Principles of Anatomy and Physiology. New York: John Wiley & Sons, Inc. Alberts B, Johnson A, Lewis J. et al. 2002. Molecular Biology of the Cell. (4th Ed.). Garland. Source document

The Secret to Research Proposal Assistance

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A Report On The Mckendree Metro Recreation Plex - 1433 Words

It’s that time of the year when exercising and going out slows down immensely, but what if I told you that a Recreation Center is being built that will fill that void literally after a mine subsidence opened almost exactly three years ago. We all know that there aren’t a whole lot of things to do around this area that you haven’t done at least a million times. This Recreation center changes that on all levels. I am not only a student and user of this upcoming facility but I also played hockey for the university along with have personal interviews with the hockey coach and athletic director of the university. Today, I will be focusing on the four P’s of marketing of this Mckendree Metro Recreation Plex. Product- The Mckendree Metro Recreation Plex is a multi faceted product that will not only serve as a workout facility, sports stadium, and general purpose building, but also as a social resource that is going to enhance the tri city area of O’Fallon, Mascoutah, and Shiloh for everyone. Now this Center will have a fully capable competition pool with mulit-level diving boards, two NHL sized ice rinks, one of which will have stadium and box seating for three thousand, a full workout gym, including machine and free weights along with a full assortment of nautilus machines, an indoor track, and full basketball court. Along with those a smaller all purpose pool, a recreation pool, workout classrooms, locker rooms, office spaces. This will also give a closer and more suitable place