Category: Essay on how to deal with high oil prices

Essay on how to deal with high oil prices

How Do Companies Forecast Oil Prices?

We use cookies to give you the best experience possible. Categories Price. Views 2. Essay, Pages 1 words. To reduce the petroleum price not only government but people also must work hard about this problem. Government must work hard to depend on other sources like solar-energy, water which are renewable sources.

Recently a Pakistani engineer Waqar Ahmad developed a vehicle that uses water as fuel. He claimed that on one litre of water a CC car can cover a distance of 40 km and a motorbike can run up to km using this technology.

Bangalore engineers has developed a car which gives kmpl and the government must focus on that cars and make those cars available in market at low cost. Traffic police must also work hard to clear traffic jam on roads because most of the fuel will be utilized by the vehicles in the traffic. In the international market petroleum trading was done in dollars.

As the Indian rupee value was decreasing we are investing more amount on that so government must focus on that. People of same destination and same work must encourage carpooling. Finally government and people must work hard to create awareness in people who live in villages for the correct utilization of petroleum.

How to Deal with High Oil Prices. Accessed December 18, Great things take some time. We've changed a part of the website. Don't be confused, we're about to change the rest of it. Just give us some more time. Download paper Categories Price Download paper EssayPages 1 words. Views 2 Essay, Pages 1 words.

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essay on how to deal with high oil prices

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essay on how to deal with high oil prices

Go To My Inbox. Your Answer is very helpful for Us Thank you a lot!Oil is the crown jewel of commodities that is used in a multitude of ways in our lives, from plastics to asphalt to fuel. The oil industry is an economic powerhouse and the movements of oil prices are closely watched by investors and traders.

Changes in oil prices can send shockwaves throughout the global economy. Every movement on the production and consumption side of oil is reflected in the price. Oil is not a diamond or caviar, luxury items of limited utility that most of us can live without. Oil is abundant and in great demand, making its price largely a function of market forces.

There are many variables that affect the price of oil, but let's take a look at how one of the most basic economic theories, supply and demandimpacts this precious commodity. The law of supply and demand states that if supply goes up then prices will go down. If demand goes up then prices will go up. So the key question is, what affects the supply and demand of oil?

The consumption side consists of hundreds of millions of us, who individually have limited power to influence prices, but collectively have plenty. The production side is a little trickier. The answer for is a little different than normal. Typically, the United States has been the largest oil producer in the last few years, outpacing the country which most would think is the largest producer: Saudi Arabia.

The reason is due to shale fracking in Texas and North Dakota. Inthe U. Saudi Arabia produced approximately No other country is producing even half as much oil as any of the top three.

Canada is a very distant fourth at 5.

Oil reserves are oil in the ground that hasn't been turned into supply. Venezuela is the leader in that category, with reserves estimated at billion barrels.

However, most of their oil is offshore or deep underground, making it hard to reach. It is also dense oil, which makes it harder to refine into usable products, such as gasoline. Saudi Arabia has the second-largest reserves, with billion barrels. As for the United States, its proven reserves are less impressive than its current capacity. The U. The remaining countries ahead of the U. Determining this information helps to determine where future supply will come from and the ability of future supply to meet demand.

It's better to have higher oil prices today: Clearview managing director

So what does a barrel of oil represent, let alone 13 million of them? Most crude oil in the United States is used to make petroleum. Petroleum is used for fueling vehicles, providing electricity, heating buildings, making plastics, and many other goods. Current statistics are only available for where the U. Consumption of motor gasoline was 9. The reason more was produced in the first place is because it became more economically efficient or no less economically efficient to do so.

Something similar has happened in recent years. Oil production in North America is at an all-time zenith, with fields in North Dakota and Alberta as fruitful as ever. As well as new supply from shale fracking. They are still catching up with the boom. The United States does not build refineries often.Crude oil prices are considered one of the most important indicators in the global economy.

Governments and businesses spend a lot of time and energy to figure out where oil prices are headed next, but forecasting is an inexact science. Standard techniques are based on calculus linear regressions and econometricsbut alternatives include structural models and computer-driven analytics. There is no widely accepted consensus on the best way to forecast oil prices.

Companies also pay special attention to — and often participate in — oil futures markets. At an elementary level, the supply of crude oil is determined by the ability of oil companies to extract reserves from the ground and distribute them around the world.

There are three major supply variables: technological changes, environmental factors, and the ability of oil companies to accumulate and replenish capital. Technical improvements — especially hydraulic fracturing and horizontal drilling — helped flood world markets with oil after Crude oil demand comes from individuals, companies and governments. Generally speaking, oil demand increases during good economic times, and it decreases during slower economic times.

Increases in the standard of living in China and India have been a major source of global demand in the 21st century. Companies need to understand these factors before making oil price forecasts, but even that isn't enough. Oil prices are heavily influenced by non-market forces, including the Organization of the Petroleum Exporting Countries OPECwhich effectively acts as a multinational oil cartel. OPEC member nations make joint decisions about how much oil to release to world markets based on what is best for their governments.

Oil is also highly regulated in most countries. The reason why movements in oil price or any commodity often surprise analysts is because there are hundreds of variables, each of them moving simultaneously in unpredictable ways. The Board of Governors of the Federal Reserve System put it best in their July discussion paper "Forecasting the Price of Oil," which began by identifying "unexpected large and persistent fluctuations in the real price of oil.

Companies hire econometricians and other market experts to make short- and medium-term predictions on the oil market.

These professionals use highly complicated mathematical models, which either focus on financials using spot and future pricesor supply and demand considerations quantifying variables and testing their explanatory power. Spot and future price models are still popular with many companies but are trending out of favor.

The basic concept is that futures markets — particularly the relationship between futures price fluctuations and spot price fluctuations — will point the way to tomorrow's oil prices.

Two influential academic papers were published in Bopp and Lady; Serletis that suggested that future oil prices were not unbiased or completely efficient, but were probably still better than any other indicators.

This conclusion was reached through error and correction models ECMswhich allow statisticians or econometricians to account for bias in futures data. It found that ECM models performed best. Later studies have been less kind to financial models. One reviewed West Texas Intermediate WTI crude oil futures prices on the NYMEX between andfinding that forward and futures prices are neither efficient nor unbiased enough to accurately predict future spot prices and, curiously, that there was "little evidence of risk premiums" in the oil market.

The authors instead recommended a time-series random walk process; random walk theory suggests that stock price changes cannot be used to predict future movement. Supply and demand models focus on macroeconomic variablessuch as OPEC production, income elasticity of demand for oil and real gross domestic product GDP.

Because there are so many possible combinations of variables, most companies or analytic services use proprietary calculations and change their formulas frequently.

The goal is to find the most statistically significant variables, then find chart fluctuations in those variables and create rough estimates for future oil price ranges. The advocates of alternative approaches, which statisticians might call "non-standard" or "nonlinear" approaches, argue that future oil prices are too random and chaotic for any traditional processes.

These methods might still use some of the same data as standard models, but the computations are based on pattern recognition rather than linear models or econometric regressions. One popular pattern recognition tool is the artificial neural network ANN. The ANN model, which is predicated on the biology of the human brain, supposedly lets the simulation learn and generalize experiences based on new data.One of my recent essays discussed the relationship between high oil prices and recession.

Consumers who suddenly find themselves paying more for fuel are hit with the equivalent of a stealth tax, leaving less money available to fuel domestic growth through purchases or investments. Thus, unsurprisingly, there is a strong historical link between escalating oil prices and economic recessions. But despite the financial pain in fact, because of it there is a major upside to higher oil prices. Consumers do respond to the price signal, and this response can provide some protection against further price spikes.

In this essay, I point out how we can mitigate against the effects of sudden price spikes, advocating for a better price signal in conjunction with long-term planning in order to allow consumers to prepare themselves in advance.

As they did during the oil price spike ofconsumers are once more demonstrating a response to higher oil prices. Drivers start to cut back on gas as prices rise. Across the country, people are pumping less into the tank, reversing what had been a steady increase in demand for fuel. For five weeks in a row, they have bought less gas than they did a year ago.

But that story also illustrates that the response to the price signal is generally not fast enough:. People are still taking a hit, even as they conserve gas.

Gas is 32 percent more expensive than it was in April In addition to cutting back on fuel purchases, consumers also start looking at more fuel-efficient vehicles. Demand for hybrid and electric cars is higher than ever, but demand for diesels — long popular in Europe due to favorable taxes on diesel fuel — is gaining steam in the U.

More so than indrivers are ready to get behind the wheel of diesel vehicles, which in some cases are more costly but also offer more miles per gallon.

essay on how to deal with high oil prices

Popular car leasing website LeaseTrader. These are all developments that will ultimately slow U. The long-term fatal flaw in U. This sort of thinking is flawed, and it leaves us ever more vulnerable, and less-prepared as a nation for higher oil prices. This is the reason I favor a more proactive approach to managing fuel prices.

When they rise sharply, consumers are unprepared and they are suddenly hit with unexpected pressure on their budgets. By implementing the idea of trading higher gas taxes for lower income taxes1. Consumers would know the increases are coming and could plan accordingly; and 2. More of the money generated by that price increase would stay within the U. Yet instead of responding with proactive long-term planning, we try to cling to the past with silly schemes like tapping the Strategic Petroleum Reserve to ease prices for consumers.

Or, we engage in military action to make sure the oil keeps flowing. In response to high prices, our political leaders engage in magical thinking, and they look for scapegoats. The other side will claim that they are high because of our failure to invest enough money into alternative energy. I believe both views are wrong. The second view is flawed because it is simply more expensive to produce renewable energy. This is almost universally true, which is why so much intervention is required to increase the renewable energy share in our energy portfolio.

People often ask me at what price point I believe various renewables will be competitive. I think those price points are farther off than most people think. That tells me two things. First, people will continue to drive at much higher prices than we are paying today. They will just continue to make difficult adjustments and that will continue to take its toll on economic growth.This page of the essay has words. Download the full version above. This essay will review how the rising fuel prices affect the different macroeconomic variables such as inflation, rising production cost, unequal economic conditions between oil exporting and oil importing nations.

It will also examine the influence on airline industry, holiday companies, shipping industry and rising unemployment rates because of the higher energy prices. There will also be a review on car sales in India. This essay will also evaluate the rising demand for alternative energy sources.

There will also be review about the effect of increasing fuel on agriculture sector and their influence on consumer behaviour.

essay on how to deal with high oil prices

The fuel prices are a significant determinant of worldwide economic performance. The oil price rise results in a transfer of income from oil importing to oil exporting countries according to a shift in terms of trade.

Gas prices increase has an influence on oil price increase. When there is a higher oil price rise and the higher prices are maintainedit will have significant macroeconomic influence on economy.

According to the net-oil exporting nationsa price rise increases their real national income due to the higher export earnings. The part of this earning will be offset by losses from lesser demand for exports because of the economic downturn suffered by trading partners.

By contrastthe rise in fuel prices have negative impact on oil importing countries while these countries must produce goods and services. As a result of thisoil importing countries needs more energy to run their local economy.

The cost of production has risen because of the increase in fuel pricesand the producers of many products charge consumers a greater price. As a consequence, the inflation increases that makes life tougher for consumers around the globe. Moreover, it has devastating effect on emerging economies where the wages are flat and the spending is rising at a rapid pace. In this case, the gap between rich and poor is increasing. The poverty figures have increased for last 3 years. Emerging economies have insufficient funds to offer the entrepreneurs in the shape of subsidy due to this expanded gap.

Therefore, it become advantageous to a entrepreneurs who run the manufacturing level of his country. The increase in fuel prices has also devastating influence on Pakistan, Ethiopia. The higher cost of manufacturing will result in inflation. The producer will sell at greater prices when the income is not rising relative to the consumption the consumer would purchase small amount of goods, and the other stocks will change in to idle.

As a result, the corporate sector will be worse-off. Producers will sell the stock at lesser price again to cover the cost that result in deflation. Hence, it discourages investors and investment will decline. The rising oil prices sinceleaded to the global economic crisis in As a result, the world GDP growth experienced a decrease from I think I need to restructure the timing. Thanks for the tips.

You really broke it down well. It comes don to timing and word of mouth. People are influenced by people in order to build trust. This is stellar stuff. I love the idea of asking for something as simple as a review during that crucial positive state.

Nice writeup and tips. Steve, I love the post. I troll for good tips like these all the time but had not seen any of the ones you noted in your post so it is like finding the end of the rainbow. And the metrics that are shared really highlight the effectiveness of these tools.

Thank you, DougSo many great tips, and take aways. Such valuable insights, thank you Steve. Such a powerful article that will help my business so much more by applying these 5 tips you generously shared. Though I will be then looking to implement the others soon after.

Great examples make this post all the better, thanks again Steve. Great point about treating your customers like people and not metrics. I have found this to be true as well.

Everyone wants to connect with someone so why not reach out to your customers. Stop guessing what's working, and start seeing it for yourself. Put Crazy Egg to the test for free for 30 days. The Daily Egg Search for: Want to make your site better. Steve Young Steve Young is the Director of Product Marketing for SmartShoot, a marketplace that connects businesses and individuals with freelance photographers and videographers from around the world.

Recommended Article Low Conversions. Conquer Your Fears by Learning How It Can Boos.

A Possible Solution to Sudden Oil Price Spikes

Fix These Nine Mistakes. SPEAK YOUR MIND Cancel Your email address will not be published. Once again, thanks for the no b. It was nice for a change. Robyn Reply Bizutik says: I really like your article. Reply Lalitha says: Good ideas here. Reply Jenni K says: Super Great article.He spent two years in TV production, working for the NFL and then for the PBS NewsHour, where he covered the 2012 election and foreign affairs.

At AdExchanger, he covers the ecommerce landscape, as well as innovations in digital marketing. Tilde Herrera is the opinions editor at AdExchanger, where she oversees the publication of all op-ed columns, including Data-Driven Thinking and Sell Sider. Based in San Francisco, she has covered business, food and sustainability as a reporter and editor for a number of publications. Her work has appeared at the San Jose Mercury, San Francisco Chronicle, Associated Press, GreenBiz, Grist and KQED, among others.

He often reports on issues surrounding data management as well as the confluence of media, creativity and technology. Prior to AdExchanger, he was senior editor at Direct Marketing News. He also spent three years as an analyst at Datamonitor, where he focused on customer interaction technologies (i.

His articles about the traditional publishing industry occasionally show up in Publishers Weekly. He is a writer, but he is not from Brooklyn. Kelly Liyakasa covers commerce, video, TV and marketing tech for AdExchanger. Previously, she was an associate editor for Information Today, where she reported on enterprise technology and strategy for its flagship publication, CRM magazine. Kelly holds a B. Zach Rodgers is the executive editor for AdExchanger, a digital advertising news and discussion site enabling the exchange of ideas among all members of the ecosystem, including agencies, advertisers, publishers and technology companies.

He has covered digital media and advertising for 13 years, most recently as managing editor for ClickZ, where, under his guidance, the site won two national business media awards for editorial excellence by the American Society of Business Publication Editors. His work has been syndicated to Mashable and Kauffman Foundation and cited by major trade and consumer associations, such as the US Federation of Public Interest Research Groups and the Center for Digital Democracy.

He previously held editorial and reporting positions at ChannelSeven. Allison Schiff is a senior editor for AdExchanger. Previously, she was senior digital strategist at Direct Marketing News, where she blogged regularly and handled Web and social strategy. Allison received her M. Sarah is a senior editor for AdExchanger.

She has held editorial positions at Film Journal International and most recently CRM Magazine, where she focused on enterprise applications and strategy. Her first job was planning digital advertising in a pre-programmatic landscape.

At Wesleyan University, she majored in Anthropology and Film Studies. As a staff reporter at AdExchanger, Alison covers advertising agencies and the digital audio landscape.

Previously a copywriter at MarketSmiths, she has written digital marketing copy and produced campaigns across multiple verticals. Prior to that Alison worked in editorial at award-winning travel journalism site Fathom.

She has a B. Scott Galloway, Founder, L2 The Marketer In The Year Ahead Louis Paskalis, SVP, Customer Engagement and Investment, Bank of America, takes the stage to discuss the year ahead and what's most important when it comes to the nexus of marketing and technology. Louis Paskalis, SVP, Customer Engagement and Investment, Bank of America Interviewed by: Kevin Mannion, Chief Strategy Officer, Advertiser Perceptions Special Presentation from Nielsen Marketing Cloud Explore the year ahead with the company that follows what people watch, listen to and buy.


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