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The world oil market is a Homogenous Co-operative Oligopoly. A broad definition of an oligopoly is a monopoly of many.

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Introduction

Name Class/ Teacher May 10, 2006 Oil Markets 1. All petroleum crude (oil) purchased or sold in the world is traded in three basic ways Spot Trading, Futures Market, and Contract arrangement. Spot transactions are on-the-spot agreements to buy or sell a single shipment at an agreed price. Since suppliers and buyers use these to bridge short-term gaps between supply and demand, spot market prices are good indicators of the supply and demand situation, rising prices indicating shortage and vice versa. There are spot markets for different products namely crude oil, heating oil, gasoline and so on, and for different regions such as Rotterdam, US Gulf, Singapore etc. Futures markets cover trades that are promises to sell and buy a consignment of oil of a specified quality, delivered at a specified place at an agreed upon price up to 18 months in the future. Very little, if any, oil changes hands physically in futures markets, these however, provide current prices and expected future trends and are more in the nature of financial transactions rather than physical trade in oil. The most important and active exchanges where such transactions take place are the New York Mercantile Exchange and the International Petroleum Exchange, London. ...read more.

Middle

Any disturbance in these conditions will lead to instability and markets will have to adjust to reach a new equilibrium point. The three scenarios in the oil market may be analysed as under: a. The Venezuelan Government persuades the OPEC to cut production quotas. Supply will reduce, but no change shall take place in the demand. The bold lines represent the demand and supply curves before the change. At equilibrium, a quantity Q1 sold at price P1. The decrease in supply, represented by the dotted supply line, is not matched by any decrease in demand. Therefore, the market will tend to find a new equilibrium represented by price P2 and quantity Q1 remaining same. In practical terms the demand may come down slightly as nations tighten their belts and the new price may be a little lower than P2 but not significantly so. b. The USA decides to build up its oil reserves. This scenario represents an increase in the demand for oil, not matched by any change in the supply position. Here the situation would be as represented by the following diagram. ...read more.

Conclusion

North Sea* 5,099 Angola 1,070 Argentina 726 Australia 465 Brazil 1,536 Canada 2,358 China 3,501 Colombia 532 Ecuador 490 Egypt 624 Gabon 238 India 669 Malaysia 748 Mexico 3362 Oman 781 Russia 8667 Syria 413 United States 5407 Other 5695 World ** 71741 (All production figures are in million barrels per year) * Consists of UK, Norway, Denmark, Netherlands and German offshore operations. ** OPEC Production is included. Appendix 3 The largest Exporters, Consumers and Importers of crude oil: Exporters Net oil exports Consumers Total oil consumption Importers Net oil imports 1. Saudi Arabia 8.73 1. United States 20.5 1. United States 11.8 2. Russia 6.67 2. China 6.5 2. Japan 5.3 3. Norway 2.91 3. Japan 5.4 3. China 2.9 4. Iran 2.55 4. Germany 2.6 4. Germany 2.5 5. Venezuela 2.36 5. Russia 2.6 5. South Korea 2.1 6. United Arab Emirates 2.33 6. India 2.3 6. France 2 7. Kuwait 2.2 7. Canada 2.3 7. Italy 1.7 8. Nigeria 2.19 8. Brazil 2.2 8. Spain 1.6 9. Mexico 1.8 9. South Korea 2.1 9. India 1.5 10. Algeria 1.68 10. France 2 10. Taiwan 1 11. Iraq 1.48 11. Mexico 2 12. Libya 1.34 13. Kazakhstan 1.06 14. Qatar 1. ...read more.

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