Question one
The country with the highest industry margin is the USA, which gets 60.6% from every litter of oil, followed by Canada and Japan, which acquire 53.5% and 47.9% per litter respectively. On the other hand, the countries with the lowest industry margin are Italy and the UK which in every litter, they get 29.0% and 29.7% respectively (OPEC statistics Data/Graphs).
The high prices of oil in the UK, Germany, and Italy, will most likely lower consumers’ demand for the product since as the price per litter goes up, the quantity of oil demanded decreases. In addition, individuals’ investment in renewables will also drop drastically as they will try to get their substitutes. Moreover, high oil prices will adversely affect businesses profitability. On the other hand, low oil prices in the USA and Canada will increase the demand for the commodity since as price per litter of oil decreases customers will tend to use more of it. Simultaneously, consumer preferences for renewables will decline and depend more on oil. Further, entrepreneurs will highly benefit since they will realize significant businesses profitability.
Question two
The gradual increase in oil price volatility in 2012 could have been driven by several factors which include, major shifts in the demand and supply of oil. For example, the abrupt international financial crisis in 2008 could have led to an increase in OPEC oil prices. Besides, a higher utilization of oil as a typical financial asset, particularly as an underlying asset for speculation purpose, can also be an explanation to the upsurge in oil price volatility of OPEC in 2012. Diminution in demand for oil imports in countries that are highly depended on by the OPEC nations could have led to the dramatic fall in prices in 2008-2009. Besides, a drop in the manufacture of exploration investments such as vehicles can also account for the reduction in price volatility following the decline in demand for oil. After 2013, OPEC countries continued with their normal oil production levels despite the other non-OPEC nations increasing theirs at the same time. This phenomenon led to an oversupply of oil in the market and the only solution to it was a drastic fall in OPEC prices. Moreover, the shale revolution which became more active in 2014 led to a sharp drop in oil prices. In this revolution, the USA became more energy independent and had a significant improvement in steering equipment and production of natural gas which is a close substitute for oil. Over the last four months, global oil demand has increased immensely by nearly 1.4 million barrels every day over the first quarter this year. This increase in oil demand has compelled OPEC countries to increase their prices to offset the high demand (OPEC statistics Data/Graphs).
Question three
Fossil fuels are of great significance since they can easily be burned to produce large quantities of energy per unit weight. Several countries like the United States produce many barrels yearly yet they depend a lot on fossil fuels which are non-renewable in nature (International Energy Statistics Total Petroleum and Other Liquids Production, 2014). However, some countries considering the detrimental drawbacks of utilizing fuel fuels prefer other energy sources such as petroleum. Such countries according to the World Bank Database in 2013 include Nigeria, Angola, Brazil, Norway, and Canada.
Works cited
OPEC. Who Gets What from a Litter of Oil in 2014? Retrieved on April 2016 from:
http://www.opec.org/opec_web/en/data_graphs/333htm .Internet source.
OPEC. OPEC Basket Price. Retrieved on April 2016 from:
http://www.opec.org/opec_web/en/data_graphs/40.htm. Internet source
International Energy Statistics. Total Petroleum and Other Liquids Production 2014. Retrieved
World Bank Development Indicators. Fossil fuel energy consumption (% of total). Retrieved on
2014 from: http://data.worldbank.org/indicator/EG.USE.COMM.FO.ZS
