Project #1 With Feedback 2

Executive Summary

Project 1

Executive Summary

Considering the present market price for natural crude oil and the aggregated demand the price of oil in the market remains at $60 per barrel. At this price a total number of 102 barrels would be on demand. This data is essential for the determination of the oil quantity that should be produced to yield more profit. Additionally, it is crucial in the identification of the nature of the oil market, which presently takes an oligopolistic market structure. this is realistic because the limitation in the number of enterprise and the firms controlled by the government dominates has been limited in the past (Yousef, 2015). This implies that these companies have substantial impact on the production of oil or natural gas. However, the majority of production of oil and gas originate from five countries which include Russia, Saudi Arabia, the U.S, Iraq, and Iran. There are 47 companies that are involved in the production of oil in the United States, however there is none which is large than ExxonMobil.

Considering profit maximization, each gallon cost $2.049. This implies that the profit on each gallon is measured based on this cost. Based on a one cent per gallon increase in retail price and the subsequent change in revenues, the price elasticity of demand is 21.74. This is defined as a highly elastic product, meaning that purchasing decisions are based closely on the price of the product rather than other factors such as quality or convenience ("Medium-Term Oil Market Report 2016," 2016). Based on the information provided in the case study, the profit maximizing price is $2.169, which would put per-barrel profit at $0.12. This work will discuss how various oil companies compete in the market in various markets to get maximum profit.

References

Medium-Term Oil Market Report 2016. (2016). Medium-Term Oil Market Report. doi:10.1787/oilmar-2016-en

Yousef, K., Al-Mutairy, S., & Haitham, F. (2015). Management, Treatment and Disposal of Wastewater (Sewage) Plan at Kuwait Oil Company (KOC). International Journal of Environmental Science and Development, 6(8), 596-601. doi:10.7763/ijesd.2015.v6.664