Case Assignment 1 Competitive Analysis and Business Cycles

Case Assignment 1 Competitive Analysis and Business Cycles...

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TUI UNIVERSITY Dean J. Keveles Module 1 Case Assignment BUS305 Competitive Analysis and Business Cycles Dr. Danielle Babb July 9, 2011
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1. What are three factors that might explain why oil prices are high? Though there are so many reasons for oil prices to rise or drop, three major factors are supply, demand, and greed. The first factor for high oil prices is scarcity of supply. Though we have become dependent on Light Crude Oil, found mostly in the Middle East, there is a significant amount of Heavy Crude available for production, found in Canada, Saudi Arabia, and within Venezuela. However, extracting Heavy Crude from the ground is more challenging, as is the costs and efforts of production; approximately four times as much. Some of the best light crude is found in Libya, which is currently in a state of turmoil. The internal strife between the Libyan government and rebel forces has caused the shipping ports to close for many periods of time, thus oil supply hasn't met demand, further causing oil prices to rise. When war affects oil producing countries, such as what is occurring in Libya and Iraq, supply is disrupted, and there exists an difficulty in meeting world demand. Which brings me to a second major factor to high oil prices; demand. The top four countries placing high demand on the oil market are the United States, European Union (though a conglomerate of countries interlocked on one continent), China, and Japan (CIA World Factbook, 2011). Much of this oil is not only for transportation or heating needs, but for production needs as well. Products made from varying degrees of plastics are on the rise. Plastics require oil in their production process. The largest consuming countries of oil are also home to many production plants turning out products made from oil. Nearly everything in our lives is made from oil, made by machinery and systems dependent on oil, and transported by oil as either gas or diesel fuel. To name just a few products which require oil in their production: Ammonia, Anesthetics, Cosmetics, Crayons, Credit Cards, Shampoo, Shaving Cream, and Shoes. To see a larger list, 144 of 6000 items, visit the Rankin Energy Corporation website.
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I truly believe another major factor for high oil prices is greed.
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