Assignment3

Assignment3 - Production and Operations Management Paper...

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P r o d u c t i o n a n d O p e r a t i o n s M a n a g e m e n t P a p e r P a g e | 1 Production and Operations Management Paper Sameer Nasafi Strayer University The Business Enterprise-BUS 508 BUS 508 Dr. Hasan Yemer May 05, 2011
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P r o d u c t i o n a n d O p e r a t i o n s M a n a g e m e n t P a p e r P a g e | 2 Marathon Oil operates around the world. Marathon Oil is one of the leading energy companies in the world. Marathon operates the majority of the refinery across the Midwest, Gulf Coast, Upper Great Plains and Southeast regions. The refineries are strategically located in the United States, making the refineries accessible to major markets. The increase in gasoline prices sometimes can be attributed to a slowdown in processing thus creating a reduction of supply. Any world situation can disrupt the supply and demand of crude oil causing an adverse affects on crude oil prices. Disruption in the refining process particularly following natural disasters such as Hurricane Katrina and Rita caused a spike in gasoline prices in the United States. There are a total of 148 operable petroleum refineries in the United States. The major crude oil refineries in the US are located in the hurricane region of the gulf coast. The creations of new petroleum refineries in different regions allow operators to shift process and production responsibilities in the event of natural disaster or scheduled outages. Another alternative is upgrading the existing petroleum refineries 70% of the United States refineries were commissioned prior to 1985. The Douglas, Wyoming, refinery was commission in 2008 it is significantly more efficient than facilities that began operating in the 80s. Crude oil prices are set by global supply and demand. Untied States Gulf Coast, Singapore and Europe are the world’s main refining centers. Factors that determine gasoline prices are the cost of crude oil, taxes, distribution cost, refining cost and profits. In the United States the cost of gasoline consist of the following factors: production and operational management is 58% of the cost, federal and state taxes is 15% of the cost, refining cost is 17%, of the cost and distribution, marketing, retail and profits are 10% of the cost for a gallon of gas. Gasoline prices fluctuate in local markets due to 2
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P r o d u c t i o n a n d O p e r a t i o n s M a n a g e m e n t P a p e r P a g e | 3 competitiveness, world events and disruption in the refinery process. The crude oil market and gasoline market are entangled however there are some instances when changes in their perspective markets are not comparable. The escalation of gasoline prices worldwide is under scrutiny because the cost of gasoline significantly impacts the budgets of consumers. The relationship between crude oil prices and gasoline cost at the pump appear broken. Retail prices for gasoline rise more quickly than crude oil and conversely drop much slower than crude oil. There have been instances when the price of crude oil held
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This note was uploaded on 07/03/2011 for the course BUS 508 taught by Professor Akpan during the Spring '10 term at Strayer.

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Assignment3 - Production and Operations Management Paper...

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