Essay on Opec and the market for Crude Oil

Submitted By mjkeller
Words: 1107
Pages: 5
Open Document
Jeff Franks
Principles of Microeconomics
7/27/11
The Market for Crude Oil
Crude oil, also known as petroleum, is the “black stuff” that comes out of the ground when drilling for oil, is made up of a combination of elements such as carbon, hydrogen and sulfur; deriving from the remains of animals and plants that existed millions of years ago; giving rise to the term “fossil fuel”. Although crude oil is of little use to anyone in its purest form, refining it can produce energy; which in turn develops gasoline, diesel fuel, kerosene, as well as other products. Finalized petroleum products will eventually end up in places like gas stations and factories all across the world.
Oil, being a “commodity”, is a product that is generally the same no matter where it comes from or who produces it. The definition for commodity as stated by Dictionary.com is, “an article of trade or commerce, especially a product as distinguished from a service.” Since oil is a commodity, this is why the prices of gas are always influcuating; depending on the worldwide supply and demand. An example of this would be after the big BP oil spill in the gulf coast and how the price of gas soared through the roof, still affecting the price of gas today.
“OPEC”, also know as the Organization of the Petroleum Exporting Countries, is a permanent intergovernmental organization, created at the Baghdad Conference by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela on September 10-14, 1960 (www.opec.org). As stated on opec.org, “OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.” Breaking new ground in the early years of the decade, an OPEC oil price band mechanism helped strengthen and stabilize crude oil prices. However, a combination of market forces, speculation and other factors altered the situation in 2004, increasing the price of oil and amplifying volatility in a well-supplied crude market. Being used as an asset class, the prices of oil soared to record levels in mid-2008, before collapsing in the emerging global financial turmoil and economic recession. In order to address the economic crisis, OPEC became prominent in supporting the oil sector as part of global efforts. OPEC established stable energy markets and sustainable development and the environment as three guiding themes; adopting a comprehensive long-term strategy in 2005, during their second and third summits in Caracas and Riyadh in 2000 and 2007.
According to ftp.eia.doe.gov; Crude Oil and Total Petroleum Imports Top 15 Countries, in April 11, 2011, the top five exporting countries accounted for 68 percent of United States crude oil imports in April while the top 10 suppliers fulfilled approximately 88 percent of all United States crude oil imports. The top 10 suppliers of crude oil for the United States in April 2011 consisted of Canada, at the top with 2,079 thousand barrels per day, Saudi Arabia (1,089 thousand barrels per day), Mexico (973 thousand barrels per day), Venezuela (902 thousand barrels per day), Nigeria (856 thousand barrels per day), Iraq (519 thousand barrels per day), Colombia (462 thousand barrels per day), Russia (288 thousand barrels per day), Angola (277 thousand barrels per day), and Brazil (210

thousand barrels per day). From March 2011 to April 2011, the average total of crude oil imports per day decreased by 318 thousand barrels from 8,715 thousand. In regards to whether the government should intervene with the crude oil market or not, I say YES! We have billions of gallons of oil sitting under the ground in Alaska while millions of Americans are struggling to get to their jobs or children on a daily basis. I do understand that there are a bunch
Show More

Related Documents: Essay on Opec and the market for Crude Oil

Speaking Copy Of Oral Presentation Outline OPEC Essay

OPEC: As an Influence on the Price of Oil SPEECH NOTES 1. Remember about a year ago when gas prices were ferociously high? In June of 2014, Canada saw its highest gas prices. It was just last year when I became somewhat enamored with the fluctuation of oil prices, after a family camping trip where my step­father complained way too much about gas costs for the entire ride, but only after a few months the price dropped severely and then he literally became a “happy camper”.…

Words 1178 - Pages 5

Everyone's Gasoline Problem

gallons of gasoline a day (How does OPEC influence gas prices?, 2012). For most of us, this has an enormous impact on our family’s weekly budget. So why does this happen and who’s to blame? This topic has several factors that can greatly affect the supply and demand of gasoline at your local gas station. For starters, gasoline is a byproduct of crude oil and the majority of crude oil is produced and sold by Organization of the Petroleum Exporting Countries or OPEC. OPEC consists of twelve countries that…

Words 929 - Pages 4

Energy security essay Jan 2010

Assess the relative importance of named players in the global supply of energy. Global energy security involves a number of players with varying roles to play; key players include OPEC, National Governments and consumers and TNC’s. All of these players are stakeholders within the energy market and have a varying degree of responsibility within the energy game Governments are responsible for energy resource supply, for example the UK government nationalised the coal industry, meaning that the government…

Words 992 - Pages 4

Teamwork: Supply and Demand and Crude Oil Essay

------------------------------------------------- Explain the major factors causing the large oil price changes Economics Coursework 1 Qiujing,WANG 7/11/2011 GROUP B Crude oil, as a scarce resource, plays an important role in modern society. It is refined and separated into a large number of consumer products. For example, crude oil is used primarily in the form of petrol and diesel to power vehicles, and which is the main fuel for transport. In addition, plastic is also made from oil, which is used widely in our daily life, from car…

Words 1959 - Pages 8

Oil Crisis and How It Is Affecting the Economy Essays

Oil crisis and how it is affecting the economy With the current spike in oil prices, many American consumers have asked, “What is going on?” In order to fully understand the current situation and how it is affecting the economy one must look at a variety of factors including: the history of oil crisis in the United States causes of the current situation, and possible outcomes for the future. It is only after meticulous research in these topics that one is prepared to answer the question…

Words 5611 - Pages 23

Why Did You Enter The Trade

Futures trades Crude Oil (Brent) 04/08/2011 Why did you enter the trade (what were your expectations?) “Libya burns, Japan shakes, Nigeria's nervous, Portugal bails, Bahrain bubbles and now China troubles. Do you need any more reasons for oil to go higher?” (Flynn, 2011, para. 1). Having read an article that suggested increase in the price of oil, I decided to set up a bull calendar spread. How did you set up the trade and how did the execution proceed? I executed a market order to buy two…

Words 429 - Pages 2

Project 1 Essay

of crude oil. When the crude oil prices increase, the price is passed on to the wholesalers, who in-turn, passes on the cost on to consumers. Crude oil prices are determined by supply and demand with a great deal of influence coming from the Oil Producing and Exporting Countries (OPEC) as they decide on how much oil to produce and sell to other countries. OPEC consists of thirteen countries which make up 40 percent of the world’s oil production and they hold a major part of the world’s oil reserve…

Words 1270 - Pages 6

Petroleum and United Kingdom Essay

Introduction The Oil and Petrol project provides an overview of the petroleum sector in the United Kingdom, identifying the major petrol companies in the United Kingdom such as BP British Petroleum, headquartered in London. There is also information on the structure of the UK petrol sector, including the processes of exploration, extraction, refining and transporting. This paper explains as well the meaning and the objective of The Organization of the Petroleum Exporting Countries (OPEC) which aims to…

Words 2721 - Pages 11

The Expansion Of Gas Prices In The United States

setting the prices. In reality it depends on the supply of crude oil, the distribution network, and the value of the U.S. dollar. The supply of crude oil is produced and sold by the Oil Producing Exporting Countries or OPEC. This cartel of 12 countries in Africa, the Middle East, and South America use the loose quota system to determine how much is needed. Its decision about how much production, pricing, and distribution affect international oil-consequentially the price of gasoline. Anything that interrupts…

Words 434 - Pages 2

Essay about Electric Vehicles and the Crude Oil Market

The University of Kansas Electric Vehicles and the Crude Oil Market Joseph Whitaker ECON 510 Paul M. Comolli 8 May 2014 Now, maybe more than ever, would be the best time to think of alternative power for transportation. Most importantly when the price per barrel of oil is again, peaking up over $100. Although the price of gas is inelastic, society should still seek out more cost effective and efficient ways of alternative transportation. Transportation is such…

Words 3894 - Pages 16