MIEC TF03 Clinton by Jia Yee

MIEC TF03 Clinton by Jia Yee https://padlet.com/s10173208/MIECProjectGroup3TF03 Group Members: Clinton (Leader), Zi Hao, Chun Yu, Jia Yee. en-us 2016-11-15 07:35:24 UTC 2017-06-30 13:40:17 UTC hello@padlet.com ok this article is fine! clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/138648156 you can discuss demand and supply changes to analyse why price wiil rise to reach 60dollars.

find other oil related articles to discuss elasticity, and cost/production n market structure too
mrs tan]]> 2016-11-18 10:22:41 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/138648156 Determinant of demand (Number of buyers in the market) clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/138648815 The main reason for the rising price of oil is the increased demand that we are seeing, especially in the developing world. Countries such as China and India are experiencing rapid rates of economic growth. Because their population is so large ( a combined population of over 2.5billion) this rapid economic expansion, combined with large population is causing an unprecedented rise in demand for oil. Demand for oil tends to be income elastic. For example, the growing middle class in China have aspirations to own a car, therefore the increase in income can cause a proportionately bigger % increase in demand.

“http://www.economicshelp.org/blog/583/oil/why-is-the-price-of-oil-rising/”

]]> 2016-11-18 10:26:04 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/138648815 Market equilibrium clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/138649214 A market equilibrium is a point where the forces of market demand intersects with the market supply and there is no tendency for any changes. When the price of oil increases, the quantity demand for oil decreases. That being said, the quantity supplied for oil will exceeds quantity demanded which would lead to a surplus. Next, a downward pressure will be incurred and the sellers are forced to lower the price until the equilibrium is met.

ok ..... mrs tan ]]> 2016-11-18 10:28:20 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/138649214 Determinants of demand (Price of related goods s10173208 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145205037 The reason for the increase in price level of oil is due to the increase in demand for oil. As natural gas is a substitute of oil, the recent increase in the prices of natural gas (from $1.963/mmBtu on 26 May 2016 to $2.48/mmBtu on 6 June 2016) will cause the point on the demand curve of natural gas to move upward. thus, Quantity demanded of natural gas decreases. Consumers will naturally search for a cheaper related goods, which is oil. This will cause the demand curve of the oil to shift rightwards. Causing the price of oil to increase.
http://oilprice.com/Energy/Natural-Gas/Why-Did-Natural-Gas-Prices-Just-Rise-25-In-Two-Weeks.html]]> 2017-01-04 08:05:57 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145205037 Determinants of supply (Expectation of Producer) imput_name_here https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145209387 Saudi Arabia expects the demand of oil to increase for US in 2017 as economy continues to strive in US. In the third quarter of 2016, US's GDP growth exceeded forecast by as much as 0.3% and the trend is expected to continue into 2017. Since US is the largest importer for oil, they will play a big part in the price of oil. A higher level of consumption of oil by the US is expected in the future and that results in the raise of oil prices.

http://www.tradingeconomics.com/united-states/gdp-growth

]]> 2017-01-04 08:58:00 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145209387 Oligopoly imput_name_here https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145211552 Only those countries that has natural oil reserve within their boundaries is capable of competing in this industry. There are only few major competitors such as Saudi Arabia and USA that has a rich oil reserve on their land that affects the flow of the entire market. The product in this case is homogeneous which is oil. Therefore, it is considered as pure oligopoly.

Moreover, based on wikipedia. The concentration ratio for oil is 88%. Te general rule states that >60% is considered oligopolistic. Hence oil industry is considered as oligopoly.
https://en.wikipedia.org/wiki/Concentration_ratio]]> 2017-01-04 09:19:22 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145211552 Short run production clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145212427 With the increase in demand for oil around the world, Saudi Arabia will supply more oil to cater with the demand.
However, using law of diminishing returns, as more and more units of a variable resource is added to a fixed resource, the marginal product will ultimately decline. In this case, the fixed variable resource is the Oil plantation while the variable resource is the amount of oil produced. Saudi Arabia can hire more workers to cater to increase in the oil supply. However, there might be congestion arising due to fixed resource. The marginal product for each workers will increase at a decreasing rate. .... ok . mrs tan]]> 2017-01-04 09:26:33 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145212427 Short run cost imput_name_here https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145213712 Over the years, some of the older oil refineries and plants are fairly inefficient and ineffective compared to those built with modern technology. Therefore, Saudi Arabia decides to shut down these inefficient factories gradually and use the manpower in a more cost-efficient manner by placing them to work in better modern refineries. This will increase the short run cost due to the investment the country puts in to build more modern refineries to take the place of the old ones.]]> 2017-01-04 09:37:02 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145213712 Long Run production and cost. s10173208 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145213985 In the long run, if Saudi Arabia plans to increase it's plant size to meet the demand for oil. The average cost will decline at first due to economies of scale. As a larger plant size means that there is more specialized machinery and extensive division of labor. However in the midst of expanding it's plant size, they may encounter diseconomies of scale. As the plant size is increasing, it will be harder to manage and the cost of coordinating resources will increase with output. Thus diseconomies of scale occurs.]]> 2017-01-04 09:39:02 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145213985 Supply sohzi_hao https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214021 In this scenario the determinant is the expectations of suppliers. To start off, Saudi Arabia is the leading supplier for Oil. Saudi Arabia expects demand to reach its maximum, “The minister said that he believed that demand for oil would peak”. To add on, “While incremental annual gains obviously vary, there is nothing more assured than increasing global oil demand. The steady drumbeat of more people, making more money, using more oil may be boring to some, but it is also perhaps our most fundamental energy reality.” states clearly that the demand of oils would only go one way which is to increase since oil is a need for many. As demand for oil increases, price of oil have to increase to meet the demands of the consumers. In the producer’s perspective, they will sell greater amount of oil at a higher price as oil has become relatively more profitable to produce as compared to other goods.

Determinants of supply (Expectation of Producer)
Saudi Arabia expects the demand of oil to increase for US in 2017 as economy continues to strive in US. In the third quarter of 2016, US's GDP growth exceeded forecast by as much as 0.3% and the trend is expected to continue into 2017. Since US is the largest importer for oil, they will play a big part in the price of oil. A higher level of consumption of oil by the US is expected in the future and that results in the raise of oil prices.

http://www.tradingeconomics.com/united-states/gdp-growth]]> 2017-01-04 09:39:19 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214021 Price Elasticity sohzi_hao https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214314 Looking at the determinants, there is alternative power sources such as clean energy from solar panels, wind turbines etc. However, alternatives are very limited as many people are unable to access this type of new technology. Also, on the demand side, the elasticity of our demand for oil is increasing. We have to use oil in our daily life. We can’t stop driving as we have to use transport to travel from one place to another.

Oil is an essential in our everyday life, a change in income would very unlikely cause much change for the demand of oil. People would react to a price change in oil, quantity demanded decreases, but the change in demand would not be significant. Due to the heavy presence of oil in our everyday lives, consumers would still continue to purchase oil even if oil prices increase. Even if oil prices decrease, the consumption would not shoot up sharply as a reduction in price would not cause people to consume more

Hence, there is not many widely available alternatives, making demand for oil price inelastic. As prices increase, there is a smaller percentage decrease in quantity demanded. Since total revenue is price times quantity demanded, total revenue increases.

Note that in the explanation of demand, it is expected that demand would fall. Won’t this reduce total revenue? It will not as we are comparing the percentage difference in price and quantity demanded. As long as the increase in price percentage is higher than the decrease in quantity demanded percentage, increase outweighs decrease and hence total revenue decreases.

]]> 2017-01-04 09:41:50 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214314 Introduction sohzi_hao https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214515 Oil is a scarce resource because it's a natural resource. Man cannot produce more oil. It's the most important resource used by almost every living person on earth. Oil scarcity can be caused by a number of factors, including technical limitations, political maneuvering, and capacity problems. Countries that control this natural resources are wealthy as oil is an integral part of our everyday life. Due to the heavy reliance of oil, change in oil prices have heavy impacts in the economy. Supply and demand shows how opportunity costs comes into play. As for this article, we are studying how oil price,demands, production would varies within the following years.

]]> 2017-01-04 09:43:31 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214515 Summary sohzi_hao https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214621 Policy reforms cut down on oil output to increase oil prices. The policy reforms is to help achieve the (2030) vision of being a stronger and more robust Saudi Arabia. However, careful measures are set into place to ensure that the policy reforms does not shock the market.

In light of the policy reforms, Saudi Aramco would be listing a part of its company for IPO, biggest of such offering in history.

Saudi Aramco has both the world's largest proven crude oil reserves, at more than 260 billion barrels (4.1×1010 m3), and largest daily oil production. Saudi Aramco owns, operates and develops all energy resources based in Saudi Arabia. According to a 2015 Forbes report, Aramco is said to be the world's largest oil and gas company.

https://en.wikipedia.org/wiki/Saudi_Aramco

]]> 2017-01-04 09:44:13 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214621 Demand sohzi_hao https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214783 Oil demands will forever be increasing as the industries expand, more oil is needed and price will inevitably rise. However, if oil prices would to continue to rise. There could be negative side effects in the demand market. As prices steadily increases, purchasing power of fixed income individuals is reduced. Here are some of the effects. The amount of oil that could be bought decreases over time, making this more costly to operate personal vehicles. Households would also feel the effects as lighting, electronics, and household appliances etc. requires electricity that is generated from the usage of oil. Companies would feel the pinch in operational costs too which could possibly lead to inflation or retrenchment. The examples show the increase in cost of living and operations, to counter the problems, people simply reduce the consumption of oil. Consumers forgo current consumption of oil in order to maintain a more stable livelihood.

Determinant of demand (Number of buyers in the market)
The main reason for the rising price of oil is the increased demand that we are seeing, especially in the developing world. Countries such as China and India are experiencing rapid rates of economic growth. Because their population is so large ( a combined population of over 2.5billion) this rapid economic expansion, combined with large population is causing an unprecedented rise in demand for oil. Demand for oil tends to be income elastic. For example, the growing middle class in China have aspirations to own a car, therefore the increase in income can cause a proportionately bigger % increase in demand.

“http://www.economicshelp.org/blog/583/oil/why-is-the-price-of-oil-rising/”

Determinants of demand (Price of related goods)
The reason for the increase in price level of oil is due to the increase in demand for oil. As natural gas is a substitute of oil, the recent increase in the prices of natural gas (from $1.963/mmBtu on 26 May 2016 to $2.48/mmBtu on 6 June 2016) will cause the point on the demand curve of natural gas to move upward. thus, Quantity demanded of natural gas decreases. Consumers will naturally search for a cheaper related goods, which is oil. This will cause the demand curve of the oil to shift rightwards. Causing the price of oil to increase.
http://oilprice.com/Energy/Natural-Gas/Why-Did-Natural-Gas-Prices-Just-Rise-25-In-Two-Weeks.html

]]> 2017-01-04 09:45:37 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145214783 Income Elasticity sohzi_hao https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145222069 Income elasticity of demand deals with how demand responds to the change in income of consumers. Income elasticity is important as it helps sellers predict the growth rate of demand for their goods and services as consumers' income goes up or down. Therefore, enables producers to adjust output and plan in anticipation for any changes in income. Oil is income inelastic. Oil is a necessity. Oil is used to run the transportation we take to travel from one place to another, power our homes and facilities and manufacture products that requires oil as an integral component. Oil producers could easily adjust output accordingly to how people react when their income changes. Oil producers would likely experience a small adjustment in oil production since oil is income inelastic. This would lower chances of surpluses that may lead to wastage or shortage that might lead to unnecessary price hikes.]]> 2017-01-04 10:48:19 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145222069 Well done Group :)) tsk6 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145827245 Everyone has put in pretty good discussion on the concept identified - now you have to have the report organised and DONT FORGET TO DRAW THE RELEVANT DIAGRAMS!!]]> 2017-01-07 19:35:59 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/145827245 chunyu's oligopoly comment tsk6 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146290178 Besides being few and large players, the other reasons for being oligopoly is the substantial barriers to entry and the mutual interdependence of competiting firms.

]]> 2017-01-10 15:58:14 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146290178 Zhi Hao- general econs tsk6 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146301343 oil is scarce bcos its a natural resource - man cant produce more oil. Its the most impt resource used by almost every living person on earth!!]]> 2017-01-10 16:29:48 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146301343 zhi haos demand and supply tsk6 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146302521 discuss both together in a market diagram
demand - is world demand rising or falling - determinamts (see Clinton's determinant of dd
supply - supply rising? who are key suppliers in world?
price trends in last few months]]> 2017-01-10 16:32:43 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146302521 Zhi Hao demand, supply: clinton & jia yee determinant of dd & chunyu determinant of SS tsk6 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146305150 combine the discussion]]> 2017-01-10 16:40:25 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146305150 Zhi Hao's Income elasticity tsk6 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146307739 more suitable to discuss price elasticity as oil is used mainly in production and would be better to discuss response of consumers to change in price.]]> 2017-01-10 16:47:12 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146307739 chunyu's sr cost n jia yee's lr production n cost tsk6 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146310164 - discuss together ?]]> 2017-01-10 16:53:54 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/146310164 clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149571216 2017-01-26 13:07:10 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149571216 Price trend for the past 5 years clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149571286 2017-01-26 13:07:26 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149571286 Substantial barriers to entry clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149596879 Oil industry is classify as oligopoly as there are only small amount of oil firm in the world, as only countries with natural oil reserve within their boundaries are capable of competing in this industry. Also, the huge oil firm size in Saudi Arabia can also practice economies of scale which includes specializing in labor and good management on the expenses.
Moreover, new competitors will find it hard to compete in this oil industry because of high start-up costs and there are many well-known oil brands such as Quaker State, Shell, Pennzoil and so on.]]> 2017-01-26 14:18:31 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149596879 Mutual interdependence of competing firm clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149605461 The oil prices in Saudi Arabia is based on the biggest cartel named OPEC (Organization of Petroleum Exporting Countries) currently ran by 14 countries.
OPEC is an organisation that ensure price stability. It obtain a stable revenue for oil production nations. It also provides regular, reliable and efficient economic supply to consuming countries. So as to ensure fair return to investors in oil industry. To sum it up, they're the regulators in the oil industry and their main goal is to ensure every oil industries would coordinate the members' oil policies. They act as a monopolist. This is the most distinct fact that distinguish Saudi Arabia Oil's industry as an oligopoly.]]> 2017-01-26 14:36:57 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149605461 Game Theory clinton870 https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149618299 For oil oligopoly, regardless if OPEC has set specific amount of oil to produce for each countries, the countries would end up benefiting themselves by producing more oil than what had been agreed upon. In conclusion, countries would want the best for themselves by producing more oil. While other countries would have to produce more oil too to prevent decreasing profit.
https://blogs.cornell.edu/info2040/2016/09/06/game-theory-in-the-oil-market/]]> 2017-01-26 15:01:55 UTC https://padlet.com/s10173208/MIECProjectGroup3TF03/wish/149618299