• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Cold weather forecasts for the next few days and low inventories have pushed up the prices of heating oil and natural gas for November delivery in the USA.

Extracts from this document...

Introduction

Commentary 1 Article: OGJ editors, Wednesday October 31st 2002, "Market watch: Cold weather pushes up heating oil, natural gas prices" Commentary: Cold weather forecasts for the next few days and low inventories have pushed up the prices of heating oil and natural gas for November delivery in the USA. Heating oil prices have jumped by 1.22c to 72.77c/gal on the New York Mercantile Exchange. "US heating oil inventories are now lower than they were at the start of August," said Paul Horsnell, head of energy research for JP Morgan Chase & Co., London. The November contract for unleaded gasoline has risen by 0.56c to 82.83c/gal. "Crude inventories have remained stubbornly low after storms should have increased them by so dramatically reducing refinery runs. ...read more.

Middle

Because the major users are industry and energy generation, however, where substitutability is fairly high, the price linkage remains strong. Cold weather will increase the demand for heating oil and natural gas, as people usually have their home temperature controlled on a thermostat in which case consumption of oil/natural gas increases automatically as the weather gets colder. This is a good opportunity for producers to increase the price. Normally, for this case, large inventories of oil and natural gas are kept in stock. However, with the inventories being as small as they are at present, there is no incentive to run them down, so prices are kept high, forcing people to either pay more or use less. ...read more.

Conclusion

Figure 2 As price increses (P1-P2), demand does not fall by very much. Increasing the price of a demand-inelastic product is a good way for companies to increase their revenue as the price change does not have a large effect on the demand. Finally, an important point would be that oil prices are geopolitically volatile. Certain events can cause them to shift very easily e.g. if George Bush would suddenly declare war on Iraq, which is currently under embargo, then oil traders might fear demonstrations of sympathy for Iraq in other Arab oil producing countries. Such fears among traders would tend to drive the price of oil futures contracts higher. Fears of reduction in supply, ceteris paribus, would drive the price up. Figure 3 As supply falls (S1-S2), price rises (P1-P2) Word Count: 440 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level War Poetry section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level War Poetry essays

  1. I need to produce a marketing strategy for a new or existing product. I ...

    annual margin * Building customer commitment leading to value creation over time, by extending the lifetime value of a customer * Generating customer advocacy where customers are enthusiastic about their service and recommend it, leading to expansion of their customer base.

  2. Maths Statistics Coursework - Comparing the relationship Between Gas Cost and Temperature

    Moving Averages of Gas Bills and Forecasting (see Fig.3) 131.52+54.41+33.62+85.19 = �76.2 (1.d.p) 4 54.41+33.62+85.19+125.68 = �74.7 (1.d.p) 4 33.62+85.19+125.68+68.42 = �78.2 (1.d.p) 4 85.19+125.68+68.42+26.25 = �76.4 (1.d.p) 4 125.68+68.42+26.25+74.78 = �73.8 (1.d.p) 4 68.42+26.25+74.78+124.99 = �73.6 (1.d.p) 4 26.25+74.78+124.99+71.36 = �74.3 (1.d.p)

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work