MOD 1 CA BUS 305 - Trident University International BUS 305...

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Trident University International BUS 305 Module 1 Case Assignment Oil Prices: Demand and Supply 1. How do changes in supply and demand effect oil prices? An increasing demand coupled with a supply shortage is a contributing factor to high oil prices. The demand for oil has increased during the last decade. Nations such as China have been growing and developing at a faster rate causing an increased consumption of oil. (Emerson, 2008/ Anderson & Buol, 2005) While the demand for oil has been increasing the supply has not kept up. Natural disasters such as hurricanes and earthquakes in producing and refining countries; wars and conflicts in countries like Nigeria, Iraq, Iran and Venezuela; and politics such as the banning of oil drill in the Gulf of Mexico have all contributed to a decrease in supply. (, 2007/ Emerson, 2008) A lack of viable oil substitutes is another factor contributing to higher oil prices. With alternative fuel sources such as solar energy, propane, electricity, hydrogen, corn fuels, and more we obviously don’t lack substitutes. The problem is that we have not developed the refining and using process of these substitutes to a point that they can be viably use to replace oil. As long as oil remains the cheapest and most efficient source of energy we have, it will be a resource that controls our economy.(Emerson, 2008) Finally, the falling strength of the U.S. dollar is a contributing factor to high oil prices. In the world economy everything is given a value based off the U.S. dollar. This is great for the U.S. when the dollar is strong compared to the currency of other countries because we are then able to buy more with our dollar than they can buy with theirs. Unfortunately we get the opposite effect when our dollar is weaker than other countries currency. As our dollar weakens we have
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to use more of them to buy the same thing. Since oil is priced in U.S. dollars, its price rises as our dollar weakens.(Emerson, 2008/ Chinaview, 2007) 2. Which two countries are the largest consumers of petroleum products? The United States of America and China are currently the largest consumers of petroleum products. Ever since it was discovered how to refine oil, the U.S. has been the number one consumer of petroleum products. In 2004 however, China’s demand for oil surged only one year after they took the number two spot for consumption of petroleum products.(Anderson &
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This note was uploaded on 03/25/2012 for the course BUS 305 taught by Professor Dr.benjaminyeo during the Spring '11 term at Trident Technical College.

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MOD 1 CA BUS 305 - Trident University International BUS 305...

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