The Oil Market

1. The Oil Market

2. Terms in the Oil Market • OPEC – a cartel of countries that join together to make decisions regarding the supply of oil in the world market • GDP – the dollar market value of all the goods and services produced in a given economy in a given time period (a barometer of a country’s economic health) • Value of the dollar – the international value of the U.S. currency • Oil is refined and processed into gasoline. • The gasoline market has demand and supply

3. Supply factors that impact the oil market • Production • Weather • Wars • Politics • Exploration

4. Who supplies oil? • OPEC, supplier of more than 40 percent of the world’s oil, lowered its forecast for 2009 oil demand to 87.66 million barrels a day due to the global economic slowdown. • The OPEC governor said that OPEC needs to study the effects of its production cuts before considering an emergency meeting by at least reviewing the data from September and October. • OPEC agreed to a limit for 11 members of 28.8 million barrels a day, 500,000 barrels lower than their July output. They meet again on Dec. 17.

6. Top Oil Producing Countries • 1  Saudi Arabia:9,475,000   • 2  Russia:9,400,000 • 3  United States:7,610,000 • 4  Iran:3,979,000 • 5  China:3,631,000 • 6  Mexico:3,420,000 • 7  Norway:3,220,000 • 8  Canada:3,135,000 • 9  Venezuela:3,081,000 • 10  United Arab Emirates:2,540,000 • 11  Nigeria:2,451,000 • 12  Kuwait:2,418,000 • 13  Iraq:2,130,000 • 14  United Kingdom:2,075,000 • 15  Libya:1,720,000 • 16  Angola:1,600,000 • 17  Brazil:1,590,000 bbl/day  

7. U.S Oil Production Total U.S. marketed natural gas production is expected to increase by 7.8 percent in 2008 and by 3.8 percent in 2009.  Strong year-over-year production growth has been led by the development of onshore fields, particularly in Texas and Wyoming, where production increased by 16 and 12 percent, respectively, during the first 6 months of 2008 relative to year-ago levels. 

8. The U.S. and the oil market • How much oil does the U.S. consume each day? • 20.7 million barrels • How much oil does the U.S. produce each day? • 7.6 million barrels • How much oil does the U.S. import each day? • 9.7 million barrels • How much does the U.S. import each day in other petroleum products? • 3.4 million barrels • Petroleum products include unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, etc.

9. US Oil Imports • CountryYTD 2008YTD 2007 • CANADA 2,459 2,458 • SAUDI ARABIA 1,558 1,435 • VENEZUELA 1,196 1,363 • MEXICO 1,302 1,593 • NIGERIA 1,052 1,054 • IRAQ 677 473 • ANGOLA 527 554 • RUSSIA 486 419 • ALGERIA 524 722 • VIRGIN ISLANDS 329 327 • BRAZIL 250 204

10. Storage

11. Demand Factors that impact the oil market • Alternative fuels • Worldwide Economic Growth • China • Conservation • Income • Changing taste and preference

12. Petroleum Consumption Growth Total U.S. petroleum and other liquids consumption is projected to decline by 610,000 bbl/d, or about 3 percent, in 2008

14. World Oil Consumption 2005 • World 80,290,000 • United States 20,800,000 • European Union 14,550,000 • China 6,930,000 • Japan 5,353,000 • Russia 2,916,000 • Germany 2,618,000 • India 2,438,000 • Canada 2,290,000 • Korea, South 2,130,000

15. Natural Gas Consumption Total natural gas consumption is expected to increase by 2.7 percent in 2008 and by 2.2 percent in 2009

16. Finding Equilibrium • Price Quantity supplied (QS) • $2.30 300 million gallons per day • $2.90 340 • $3.20 380 • $3.50 400 • $4.10 500 • Price Quantity demanded by all U.S. consumers of gasoline (QD) • $4.70 300 million gallons per day • $4.10 350 • $3.50 400 • $2.90 425 • $2.30 470

17. Oil Prices

21. Price Setting • Is the market efficient? • Price gouging – pricing above the market price when no alternative retailer is available

22. Price of Unleaded Gasoline

23. Unleaded Gas Price