Saturday, March 19, 2005

oil strikes record

referring to article published by the Sun on 18 March 05; "Oil strikes record, OPEC mulls 2nd output rise"

First of all, we know that oil is a commodity. According to some sources in Shell, it is because petroleum producing countries wanted to help companies like Shell to have enough supply for its need. Even though company like Shell does having own refinery, but its capacity will never be enough, thus they still need to buy from other people; commodity. According to the article, the actual reason for selling oil as commodity is actually.

paragraph 1: "oil price high, OPEC consider output increase"
paragraph 6: "we thought there is enough supply in the market."
"we have share responsibility"

Conclusion:
ok, we have to understand that Shell is not part of OPEC. OPEC don't really want to help Shell, but they sell it as commodity because they can sell it at a higher price with the play of demand and supply. See, if they thought the supply is enough(whether lying or no),, it means for 100 units of oil for 100 customers, they can sell for a higher price if there is more than 100 customers. They hought theyre are 100 customers but hope for more. Once they earn that extra margin, they will increase production by spending more money on production cost and to bring down oil prices. Thus, if they can maintain a fixed operation cost, they can afford to make money.

How i come to this conclusion?
Oil prices high --> because demand high, supply low.
"OPEC consider output increase" --> supply low not because cannot produce but because they didn't consider.
meaning : They didn't consider because they have a better reason & that reason would be oil price high. thus because they failed to consider supply increase for low price and therefore it means they want the supply to be limited for high price. The only way is supply & demand evaluation.

And as for how they do that kind of real-time (whole world analysis) ? The answer is commodity.

so when oil prices is too high, who is responsible actually? OPEC.

OPEC producer blame it on the fact that it has limited copacity to produce fuel.

Norway is the third largest non-cartel exporter.

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