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The World Oil Market in 2008

The World Oil Market in 2008

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The World Oil Market in 2008

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  1. The World Oil Market in 2008

  2. For more resources on the economics of Oil & Gas, visit our dedicated Economics Blog Channel

  3. Market volatility • Crude prices reached a record high in July of $147 a barrel • By the end of the year prices had collapsed – on one measure light sweet crude oil fell below $40 a barrel • OPEC is desperately trying to stabilise prices through a series of production cuts • The main cause of the collapse in prices is a sharp fall in global demand for oil

  4. A super-spike in prices

  5. Where next?

  6. Oil – a case study in price volatility

  7. Explaining high and low oil prices Price per barrel Short run supply P1 Demand Q1 Quantity of Oil

  8. Explaining high and low oil prices Price per barrel Short run supply P1 D2 Demand Q1 Quantity of Oil

  9. Explaining high and low oil prices Price per barrel Short run supply P2 P1 D2 Demand Q1 Quantity of Oil

  10. D2 + speculation Speculation can cause price spikes Price per barrel Short run supply P3 P2 P1 D2 Demand Q1 Quantity of Oil

  11. Supply more responsive over time…… Price per barrel Short run supply P3 Medium term supply P2 P4 P1 D2 + speculation D2 Demand Q1 Quantity of Oil

  12. Falling demand as recession bites Price per barrel Short run supply P3 Medium term supply P2 P4 P1 D2 + speculation D4 Q1 Quantity of Oil

  13. Falling demand as recession bites Price per barrel Short run supply P3 Medium term supply P2 P4 P1 P4 D2 + speculation D4 Q1 Quantity of Oil

  14. Oil prices and the number of rigs

  15. Will OPEC succeed in cutting output and stabilising prices?

  16. OPEC’s share of world supply

  17. UK oil consumption now at a twenty year low

  18. Oil producers – selected countries

  19. How much will world demand fall in 2009?

  20. Oil provides a bonanza for some

  21. The UK is now a net oil importer

  22. UK quarterly balance of trade in oil

  23. And North Sea oil output is well beyond the peak

  24. Crude prices and prices at the pumps

  25. Marginal and average cost • It has been estimated that the average cost of oil per barrel is around $50 • And that the marginal cost of bringing on additional output is between $75-$80 per barrel • Explain some of the reasons why there is a difference between the marginal and average cost of production.

  26. Oil Market Videos • OPEC agrees record oil output cut • Russia rues oil price fall • Oil prices fall below $50 per barrel • Oil price affects crayon firm • High oil prices lifts BP profits • New battle over Arctic oil • Why High Oil Prices Hits Us All