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.
It is good to hear that there is a suggestion for oil producers and OPEC to work together in trying to create a steady oil price. I agree that a stable price would be better for the economy. Limiting the fluctuation of the cost of oil, would lead to consistent costs for consumers. Benefits of this would include less fretting for the average person. Instead of searching for the best deal on gas, which is based on the price of oil, the customer could go anywhere at any time not worrying about the gas price changing. However, if the oil price keeps fluctuating, there would be a hike in freight-in costs, causing the prices of merchandise to increase. In addition, there would be a fuel surcharge imposed on transportation including air and ferry fares. If there is a "fair price range", the surcharges would be avoided. Thus, the average person would have more pocket money to spend.
ReplyDeleteThis article highlights one of the main concerns us Canadians face which is the fluctuaing high oil rates. I think that's really wrong of them not to produce more oil(even though it's available) and not making an attempt for the oil cost to go down. Oil cost strongly impact the frieght-in cost which will result in consumers paying higher price on goods. That's nothing but more cost added to our daily living cost. I strongly think they should produce as much oil as there is and stabalize the oil cost so as regurlar day people that take transportation everywhere, won't end up paying more for gas and we won't have to worry about the hassle of roaming around to look for the cheapest gas price.
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