In the demand side, Methanex’s revenue was exposed to the fluctuation of the demand for methanol, since Methanex only produced methanol. This situation was more serious in the supply side, where the price the “raw material”, natural gas was subject to fluctuating prices, interruptions to supply lines and international policies and regulations governing imports and exports. In last decades, some plants in New Zealand and Egypt had to shut down temporally for fluctuating price of natural gas or political issues. The options for Methanex to solve/relieve these issues include: • Using derivatives on natural gas and methanol to hedge the risk from price fluctuation • Expanding the market in China to explore opportunities in both demand and supply sides • Exploring opportunities in areas where long-term contacts on demand (in methanol) or supply (in natural gas) instead of focusing only on the richness in natural gas reserve • Expanding new products lines to reduce the risk from strongly relying on a single product. It could also make use of the idle resources (plants, machines, etc.)
Explain why oil exploration in the areas shown could lead to high economic and environmental costs. (10) Oil exploration in the areas show brings many environmental and economical challenges with it. The economic cost can be very high due to the extraction techniques used as in the majority of the areas highlighted there are extraction issues due to technical difficulties such as unconventional oil, such as the Canadian Tar Sands and deep water see oil, such as in the Gulf of Mexico which is hard to access. The extraction costs for both these methods is very high and would need high oil prices to see a good return economically. To add to this these methods need vast amounts of energy for extraction, causing the high extraction cost and with this also pollute greatly as the oil is extracted and so raise CO2 and other GHG emissions before the fuel is even burnt.
(b) Movement up along (as a result of a rise in price). (c) Movement down along (as a result of a fall in price resulting from a fall in demand as suppliers switch to coal fired stations). (d) Shift left (if companies want to conserve their stocks in anticipation of a price rise). (e) Shift right (more of a good in joint supply is produced). (f) Shift right.
Another global player are the OPEC nations. These nations have major reserves of oil, therefore can set the price of oil in its member countries. This has led to prices of oil changing, having periods of very high prices and periods of very low prices. For example, Saudi Arabia has 22% of worldwide oil reserves, meaning they can sell their oil globally to countries with smaller oil reserves meaning they can make a large profit. Nationally, different Governments are involved in the global supply of energy.
Additionally, the continuously increasing steel prices leading to higher production costs and impacting product’s margin. Other players initiated price war (price differential of 5 to 10 % of Fortis discounted prices) while Fortis refused to continuously cut its prices, which caused Fortis to lose market share to its competitors. Increasing price sensitiveness of Fortis customers, decreasing market share coupled with low production utilization (70%) is increasing more and more pressure on Fortis to lower prices. In addition to its standard “4-8-14” discount, Fortis can apply price-flex strategy in order to selectively meet lower competitor prices. Question 3) Fortis marketing strategy focuses on value-added service to customers.
The events leading to this notable and heavily debated “bailout” are varied and disputable. Beginning in mid 2008 there were several important indicators worldwide foretelling a likely economic crisis. Some indicators included high oil prices, which led to both high food prices (due to a dependence of food production on petroleum and using food crop products such as ethanol and bio-diesel as an alternative to petroleum), global inflation, a substantial credit crisis leading to the bankruptcy of large and well established investment and commercial banks in various nations around the world, increased unemployment, and the possibility of a global recession. [4] Furthermore, the United States entered 2008 during a housing market depression, a sub-prime mortgage crisis, and a declining dollar value. In February 63,000 jobs were lost (a 5-year record) and in September 159,000 jobs were lost, bringing the monthly average to 84,000 per month from January to September of 2008.
He explains that as the global need for oil grows it puts more money in the pockets of the oil producing countries. He has a great “law” in this chapter that says that as oil prices increases the amount of freedom decreases. I found this very interesting just because the measure of freedom can be very subjective and it depends on what a person’s view of freedom is. He also tries to say that the increase of money in these countries fuels more terrorism. Which is another subjective idea because any country becomes richer would almost everything increase?
OPEC: OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry. OPEC's share of the smaller oil MARKET fell heavily and its total petroleum income dropped below a third of earlier peaks, causing severe economic hardship for many Member Countries. September 1960 was OPEC's formation by five oil-producing developing countries in Baghdad occurred at a time of transition in the international economic and political landscape, with widespread decolonization and the birth of many new independent states in the developing world. Oil in Saudi Arabia: The story of Saudi Arabian oil goes back to 1933 when King Abdulaziz bin Abdulrahman AL Saud granted Standard Oil of California (Socal), later renamed Chevron, the right to prospect for oil in the new Kingdom.aIn 1938, Socal discovered large quantities of oil in the
Downstream refers to oil and gas operations after the production phase and through to the point of sale, whether at the gas pump or the home heating oil truck. Upstream is the grass roots of the oil business, it refers to the exploration and production of oil and gas. Many analysts look at upstream expenditures from previous quarters to estimate future industry trends. For example, a decline in upstream expenditures usually trickles down to other areas such as transportation and marketing. Economic conditions: Supply and Demand On the supply side markets has been driven by geopolitical volatility in recent months.
To what extent does the world have an energy crisis? There has been an enormous increase in the global demand for energy in recent years due to rapid industrial development and population growth, especially in the less developed countries. The crisis will become when demand exceeds supply. A crisis like this can develop as a result of industrial actions such as strikes and government refusal for the movement of merchant ships in or out of ports. The cause of these could be over-consumption or prices rising at oil refineries.