Article: http://news.yahoo.com/s/afp/20101018/bs_afp/saudioilopec_20101018231628
Summary:
This article is about the Saudi Arabia's oil minister wanting to stabilize the cost of oil. Saudi Arabia can maintain a production capacity of 12 million barrels a day which is 50% more than it's current production. This means that there are more oil that can be produced but aren't being produced. This drives up the oil cost. It's all supply and demand. The less oil is produced and the higher the demand, the higher they can jack up the prices. Right now, they have a surplus of oil that can be easily accessed, yet they aren't producing it to it's highest potential. This is why the oil minister wants OPEC and oil producers to work together to keep oil prices in a range of $70-$80/barrel and to make sure there is a steady supply of oil. Officials had said that this price range is a "fair price range".
Connections:
What does oil pricing have anything to do with merchandising? Well, in order to transport items to sell, you need oil to power whatever your choice of transportation is. If the oil price is higher, the cost of transportation would be more expensive, thus making everyone raising their prices. Are people going to be willing to spend more on your merchandise? Also, it could heighten your expenses if you are in the the manufacturing industry because you may have machines that operate on oil. The transportation cost change would affect the Freight-in account which in return will affect your profit. The oil pricing affects everyone, from manufacturers to consumers.
Reflections:
Merchandising businesses raising prices would mean we, as consumers, would have to take more money out of our wallets. The oil prices will not, however, affect our wages, though. It doesn't help that our own transportation would cost more. If they were to actually go through with it and stabilize the oil prices at a "fair price range", everyone will benefit. Businesses will make more and we would have to pay less, hopefully. Saudi Arabia may not make as much as it did, but they will, at least, have a steady income. The steadying of oil prices can help predict what kind of financial picture is up ahead, to better plan for expenses.
