This article discussed about the recent things going on in the oil market. The international energy agency predicts that the demands for oil will less than that of the previous month. There are mainly 2 reasons for it. One is the increase in price of oil. As the article mentioned, “Oil prices have doubled over the last year to $126.40 a barrel yesterday”. Such high price leads the demand for oil to decrease. However, this only occurs in developed countries such as America. Because developing countries need much more energy to develop. So the demand for oil is almost perfectly price inelastic. Hence the demand for oil in countries such as China and India will still increase. The government has to provide subsidies for oil to make sure that people can afford.
Usually, the high price will lead demand curve to shift to left and the price will fall till quantity demanded is equal to quantity supply. However, due to the unchanged or even increasing demand for oil due to the developing countries. The demand for oil in the world will only drop by little.
Another reason is increasing number of alternatives for oil. In developed countries, the scientists have been trying to find suitable alternatives for a long time. And there are a number of good alternatives such as bio fuel. Hence the increase in price of oil also leads the increase in demand of other fuels. However, because of the lack in technology, the developing countries do not have good alternatives but oil. That’s why the demand of oil in developing countries will not decrease.
The article also mentioned that “there is no clear single explanation for the high oil price”.
The Organization of Petroleum Exporting Countries (OPEC), which is the biggest supplier of world’s oil decided to lower the supply by 0.3-0.6 barrel a day. It is because they do not want the oil price to fall even though the demand is falling. As the president of the biggest oil- consuming country, George Bush wants Saudi Arabia to increase the amount of oil supplied in order to slow down the high-pace growth of oil price. However, OPEC is not likely to do this as they said that “releasing more crude to the market would affect runaway crude prices.” Therefore OPEC will stick to its current schedule and not produce more crude.
As alternative resource of oil, “Biofuel will contribute about two third of the total growth in non-OPEC fuel production this year. In long term, this will affect the demand for oil to fall if the price of the oil is too high.
by group 3
Monday, May 26, 2008
Sunday, May 25, 2008
IEA Cuts 2008 Oil Demand Forecast for Fourth Month (Update2)
By Bill Murray
May 13 (Bloomberg) --
The International Energy Agency, the energy adviser to 27 nations, cut its forecast for global oil demand in 2008 for a fourth month as record prices crimp consumption in the world's most developed economies.
The forecast was cut by 390,000 barrels a day to 86.84 million barrels a day, from 87.23 million barrels last month, the Paris-based agency said today in its monthly report. After today's revision, which "may not be the last,'' the group expects world consumption to grow 1.2 percent this year, the slowest expansion since 2006.
Oil prices have doubled over the last year to $126.40 a barrel yesterday, and record energy costs may cause a global recession, IEA Executive Director Nobuo Tanaka said last month. Crude may rise to between $150 and $200 within two years as supply stagnates, Goldman Sachs Group Inc. analysts led by Arjun Murti said last week.
"Oil prices are too high for everyone, especially for developing countries which are also facing other price increases,'' Tanaka said at a conference in Paris today. "There's no clear single explanation for the high oil prices.''
Stockpiles
Stockpiles of crude and oil products in the developed economies of the OECD fell by 1.3 million barrels in March to 2.56 billion barrels, the IEA said. That's enough to satisfy demand in the world's most developed economies for 53.3 days and was little changed from last month, the group added.
"It's not surprising when you get a doubling of price to $120 a barrel that you get a reduction in demand,'' Lawrence Eagles, head of the IEA's Oil Industry and Markets division, said today in an interview. The reduction "is concentrated in developed economies at this point.''
Demand in both in China and the Middle East will rise 4.9 percent this year, making up for a drop in demand from North America and Europe, the IEA said. Countries in Asia, including India and Indonesia, subsidize fuel to allow consumers to buy at below-market prices.
Indonesia, where subsidies on fuel will reach $12 billion in 2008, is under increased pressure to reduce them, while China may spend about $45 billion subsidizing oil refiners who suffer from fuel price caps.
Crude oil for June delivery rose 48 cents at $124.71 a barrel in electronic trading on the New York Mercantile Exchange as of 1:03 p.m. in London. The contract earlier fell as much as $1.13 to $123.10.
There's a decoupling, part of which "is based on price subsidies and as prices go up, these subsidies become considerable,'' Eduardo Lopez, an analyst at the IEA, said in a television interview. "Countries in Asia are struggling to keep them. Prices can't continue to rise indefinitely, something will have to give.''
OPEC Production
The Organization of Petroleum Exporting Countries, whose members produce more than 40 percent of the world's oil, will need to supply an average of between 31.3 and 31.6 million barrels a day of crude this year in order to balance global demand, less than April's 31.9 million a day, the report said.
"If we start seeing demand down by this amount, it should have an effect on the market,'' said Robert Montefusco, a broker with Sucden (U.K.) Ltd. in London. "I think OPEC has been right to say the market has a lot of crude around.''
U.S. President George W. Bush will ask Saudi Arabia, the world's largest exporter, to increase oil production when he visits the kingdom later this week. A previous request by Bush for OPEC to raise output was snubbed when he visited in January.
"OPEC representatives appear to have dismissed the idea that releasing more crude to the market would affect runaway crude prices,'' the IEA report said.
OPEC will stick to its current schedule of meeting in September and won't produce more crude in the meantime, said Iran's OPEC Governor Hossein Kazempour Ardebili and Venezuelan Energy and Oil Minister Rafael Ramirez this week.
Saudi Output
Saudi Arabian crude output was down 30,000 barrels a day to 8.77 million barrels a day in April, the IEA said. Iran produced 3.93 million barrels a day, less than last month's 4.02 million, the group said.
Biofuels will contribute about two-thirds of the total growth in non-OPEC fuel production this year, increasing by 425,000 barrels a day, the report said. Total non-OPEC supply will average 50.4 million barrels a day in 2008, an annual increase of 680,000 barrels.
website
by group 3
By Bill Murray
May 13 (Bloomberg) --
The International Energy Agency, the energy adviser to 27 nations, cut its forecast for global oil demand in 2008 for a fourth month as record prices crimp consumption in the world's most developed economies.
The forecast was cut by 390,000 barrels a day to 86.84 million barrels a day, from 87.23 million barrels last month, the Paris-based agency said today in its monthly report. After today's revision, which "may not be the last,'' the group expects world consumption to grow 1.2 percent this year, the slowest expansion since 2006.
Oil prices have doubled over the last year to $126.40 a barrel yesterday, and record energy costs may cause a global recession, IEA Executive Director Nobuo Tanaka said last month. Crude may rise to between $150 and $200 within two years as supply stagnates, Goldman Sachs Group Inc. analysts led by Arjun Murti said last week.
"Oil prices are too high for everyone, especially for developing countries which are also facing other price increases,'' Tanaka said at a conference in Paris today. "There's no clear single explanation for the high oil prices.''
Stockpiles
Stockpiles of crude and oil products in the developed economies of the OECD fell by 1.3 million barrels in March to 2.56 billion barrels, the IEA said. That's enough to satisfy demand in the world's most developed economies for 53.3 days and was little changed from last month, the group added.
"It's not surprising when you get a doubling of price to $120 a barrel that you get a reduction in demand,'' Lawrence Eagles, head of the IEA's Oil Industry and Markets division, said today in an interview. The reduction "is concentrated in developed economies at this point.''
Demand in both in China and the Middle East will rise 4.9 percent this year, making up for a drop in demand from North America and Europe, the IEA said. Countries in Asia, including India and Indonesia, subsidize fuel to allow consumers to buy at below-market prices.
Indonesia, where subsidies on fuel will reach $12 billion in 2008, is under increased pressure to reduce them, while China may spend about $45 billion subsidizing oil refiners who suffer from fuel price caps.
Crude oil for June delivery rose 48 cents at $124.71 a barrel in electronic trading on the New York Mercantile Exchange as of 1:03 p.m. in London. The contract earlier fell as much as $1.13 to $123.10.
There's a decoupling, part of which "is based on price subsidies and as prices go up, these subsidies become considerable,'' Eduardo Lopez, an analyst at the IEA, said in a television interview. "Countries in Asia are struggling to keep them. Prices can't continue to rise indefinitely, something will have to give.''
OPEC Production
The Organization of Petroleum Exporting Countries, whose members produce more than 40 percent of the world's oil, will need to supply an average of between 31.3 and 31.6 million barrels a day of crude this year in order to balance global demand, less than April's 31.9 million a day, the report said.
"If we start seeing demand down by this amount, it should have an effect on the market,'' said Robert Montefusco, a broker with Sucden (U.K.) Ltd. in London. "I think OPEC has been right to say the market has a lot of crude around.''
U.S. President George W. Bush will ask Saudi Arabia, the world's largest exporter, to increase oil production when he visits the kingdom later this week. A previous request by Bush for OPEC to raise output was snubbed when he visited in January.
"OPEC representatives appear to have dismissed the idea that releasing more crude to the market would affect runaway crude prices,'' the IEA report said.
OPEC will stick to its current schedule of meeting in September and won't produce more crude in the meantime, said Iran's OPEC Governor Hossein Kazempour Ardebili and Venezuelan Energy and Oil Minister Rafael Ramirez this week.
Saudi Output
Saudi Arabian crude output was down 30,000 barrels a day to 8.77 million barrels a day in April, the IEA said. Iran produced 3.93 million barrels a day, less than last month's 4.02 million, the group said.
Biofuels will contribute about two-thirds of the total growth in non-OPEC fuel production this year, increasing by 425,000 barrels a day, the report said. Total non-OPEC supply will average 50.4 million barrels a day in 2008, an annual increase of 680,000 barrels.
website
by group 3
Tuesday, April 15, 2008
Hi, all EC2Cs.
any of you are interested in purchasing the Sloman Econimics textbook.
it's about 45 dollers (selling at $>50 outside) from the supplier (same suppliers who come to our school last time selling bio text books)
if you are interested, please leave your name in the commend. we are considering to purchase together~ ^^
any of you are interested in purchasing the Sloman Econimics textbook.
it's about 45 dollers (selling at $>50 outside) from the supplier (same suppliers who come to our school last time selling bio text books)
if you are interested, please leave your name in the commend. we are considering to purchase together~ ^^
Friday, April 4, 2008
Both Nestle and Mars are chocolate manufacturers. With the rising price of raw material like wheat and cocoa, cost of production increases for both Nestle and Mars. If the firms do not adjust their supply curve, they will lose part of their profits as total revenue remains the same, yet cost of production increases.
Take Nestle as an example, if Nestle decides to maintain to be as profitable, it can only produce less at each price level, meaning that the supply curve is shifted to the left. Demand curve still remains the same. Equilibrium price increases. Consumers have to pay more to buy the same amount of products. Additional costs are passed onto the consumers.
Possible shortcoming of this decision is that Nestle may lose its costumers if we consider Nestle and Mars as close substitutes. Price elasticity of demand of Nestle is high. If Nestle increases its price but Mars does not, the increase in price of Nestle will result to a decrease in quantity demanded of Nestle to a greater extent. Thus, total revenue decreases. The firm’s profit may not be as high as expected. However, as Nestle announced, the brand loyalty has differentiate Nestle from other chocolate manufacturers, making it less substitutable. Nestle is less price elastic. Even with an increase in price, its quantity demanded is not affected much. Total revenue increases and profit increases.
If firms are afraid of losing customers by increasing price and, at the same time, are not willing to hold customers at an expense of losing profits, all chocolate manufacturers may come to some agreements that they will all raise their price at the same rate and same time. Price is pushed up for all chocolate products so that consumers, having no choice, can only pay more. However, this sort of behavior is illegal and vicious. Government will intervene to prevent it.
Take Nestle as an example, if Nestle decides to maintain to be as profitable, it can only produce less at each price level, meaning that the supply curve is shifted to the left. Demand curve still remains the same. Equilibrium price increases. Consumers have to pay more to buy the same amount of products. Additional costs are passed onto the consumers.
Possible shortcoming of this decision is that Nestle may lose its costumers if we consider Nestle and Mars as close substitutes. Price elasticity of demand of Nestle is high. If Nestle increases its price but Mars does not, the increase in price of Nestle will result to a decrease in quantity demanded of Nestle to a greater extent. Thus, total revenue decreases. The firm’s profit may not be as high as expected. However, as Nestle announced, the brand loyalty has differentiate Nestle from other chocolate manufacturers, making it less substitutable. Nestle is less price elastic. Even with an increase in price, its quantity demanded is not affected much. Total revenue increases and profit increases.
If firms are afraid of losing customers by increasing price and, at the same time, are not willing to hold customers at an expense of losing profits, all chocolate manufacturers may come to some agreements that they will all raise their price at the same rate and same time. Price is pushed up for all chocolate products so that consumers, having no choice, can only pay more. However, this sort of behavior is illegal and vicious. Government will intervene to prevent it.
Tuesday, April 1, 2008
13 Feb 2008 Germany Price Fixing
Chocolate manufacturers Nestle and Mars were amongst companies who received a visit by German competition authorities. The German Federal Cartel Office is reported to have gone to the headquarters of Nestle, Kraft and Mars in Germany last week as part of investigations that it is carrying out on alleged price fixing in the chocolate industry.
One of the problems facing chocolate producers, like other food product manufacturers, is the rising price of raw materials. Wheat, dairy and cocoa prices have all risen sharply and have put margins under pressure. When input prices rise firms have the option of keeping prices the same and facing smaller profit margins or increasing prices and passing the additional costs on to consumers.
If the firms believe that they can do the latter, then they may well be tempted to do so but when making this decision they will have to think carefully about what their rivals might do. If Nestle, for example, increased their prices but Mars did not, Nestle might lose out on sales to Mars as consumers switch to cheaper products. In making such a decision companies will also be considering the extent of the customer loyalty that they enjoy as well as whether they think that the market will be able to withstand a rise in price.
What has triggered the interest of the German competition authorities is the fact that some of the chocolate producers all raised their prices around the same time. The competition authorities clearly suspect that this sort of behaviour is worthy of investigation.
In October 2007, Nestle announced that it expected to be able to meet its target for sales growth of between 5% and 6% and analysts had predicted that it would be able to raise its margins in the process. Nestle itself said that the strong performance was due to the strength of its brands in the market. The company's chief executive, Paul Brabeck, said at this time that brand loyalty had allowed the business to be able to pass on the higher costs to customers.
The German authorities will be looking to see if there is any suggestion that decisions to increase prices by chocolate manufacturers have any other links than pure coincidence. It is entirely possible, of course, that all these firms have been facing higher input costs at the same time and decided to pass on these costs as a result. The German authorities will continue its investigations to determine whether there has been any breach in competition rules.
URL for this news item: http://www.bized.co.uk/cgi-bin/chron/chron.pl?id=3024
Wednesday, January 23, 2008
grouping
okey, here is the grouping
group1: yaoyi, mufeng, zihao, chixuan
group2: arthi,grace, amanda teo, joycelyn
group3: qingyun, daniel, amanda chong, rachel
group4:xinyi, mengyuan, danni, jiamin
group5:zile, allan, yile, muhammad, minh
group1: yaoyi, mufeng, zihao, chixuan
group2: arthi,grace, amanda teo, joycelyn
group3: qingyun, daniel, amanda chong, rachel
group4:xinyi, mengyuan, danni, jiamin
group5:zile, allan, yile, muhammad, minh
Saturday, January 19, 2008
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