35._Just_Another_Commodity_S08

35._Just_Another_Commodity_S08 - 35. Just Another...

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35. Just Another Commodity?
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2 Major Themes Oil becomes a commodity Prices are more volatile due to nature of supply & demand (Rockefeller) Traders discover a price. Producers can influence price by controlling production Risk is openly priced Industry returns to drilling for oil on Wall Street Sets the stage for major consolidation during 1990s
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3 The Biggest Boom The end of the 70’s and the Second Oil Shock saw oil prices skyrocket to $34 a barrel. Huge sums of money were being exchanged. Oil companies began to invest in shale oil technology, oil that would free oil in mountains; Exxon. But by the early 1980’s, price and demand for oil was going down, and research in shale oil subsided. Exxon terminated the Colony Shale Oil Project
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4 The Double Dip America hit the “Double Dip” recession in the early 1980’s, with the two bottoms being in 1980 and 1982. The recession was caused by tight monetary policy (high interest rates brought on by high inflation) and lack of spending power. Both were caused by the high prices of oil. Developing countries were debt-laden This recession halted increasing demand for oil. Coal, nuclear and LNG increased in electricity production Increased energy efficiency (27.5 mpg) and conservation New technology and production sites also increased supply of oil available.
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5 As the price of oil increased, so did the price of outputs that required oil as an input. This, as we know, causes inflation. The Federal Reserve, hoping to halt the upward
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This note was uploaded on 04/19/2011 for the course EGEE 120 taught by Professor Considine,timothy during the Spring '07 term at Penn State.

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35._Just_Another_Commodity_S08 - 35. Just Another...

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