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Economy of oil and its future

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  1. Industry analysis
    1. The intensity of competitive rivalry
    2. The bargaining power of the suppliers
    3. The bargaining power of the customers
    4. The threat of the entry of new competitors
    5. The threat of substitute products or services
  2. SWOT analysis
    1. The internal analysis
    2. The external analysis
    3. The financial analysis
    4. The strategies
  3. Conclusion: Kuchen's opportunities and objectives

There is not a week that passes by without the word oil making the headlines of newspapers across the world. Oil plays a vital role in the economy, environment and even politics of a country. A number of objects or products everywhere require the use of oil or a derivative, and one needs to use oil almost everyday without paying much attention to it. The importance of oil in one's daily life can be shown through simple examples like: oil that fuels the cars, fuel oil for machines, cooking gas etc. Oil also meets the growing needs of many developing countries. It also accounts for a significant share of the global economy. Despite the many advantages it has, oil is a fossil resource, and its exploitation is something that is irreversible.

So the question is: How is the oil economy organized? What are the disadvantages of oil? How can the world manage the situation once the oil reserves are exhausted? Oil, is literally rock oil, and this is derived from the decomposition of organic plants and animals. It is a strategic product used in many different sectors, which makes it a vital commodity and this makes it important in the global economy. Oil prices are based on the price of a barrel, and a barrel may contain 159 liters of oil approximately. The countries with few, or no oil resources generally have to import oil. Hence, these countries have to watch out for the price rise, as it may affect their economy. Until the 1970s and the 1980s, a majority of the Western countries depended heavily on the oil producing countries of the Middle East. But now they have learnt to diversify their supplies and control their energy costs better. They have also begun looking for alternative energy sources.

France is a classic example of this phenomenon. France has been building nuclear power plants as an alternative source of energy. In terms of diversification of supply sources, the two oil shocks (1973-1979) brought the price of crude oil to the highest level. Oil operations at sea and in Siberia became profitable. It was only from the early 80s that offshore oil extraction began in earnest. The OPEC or the Organization of Petroleum Exporting Countries was established in 1960 in Baghdad (Iraq). The OPEC was established following a decision by oil companies to lower the price of crude oil meant for exports. Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela are the members of the OPEC.

The aim of OPEC is to coordinate the petroleum policies of its members to safeguard their interests while avoiding excessive price fluctuations and damaginge to the international community. OPEC is registered with the UN and therefore adheres to the UN Charter. Since the 1980s, the oil pricing is free and depends on the supply and demand on the world market. Today, OPEC meets in ordinary sessions twice a year, sets a target price and decides on the production adjustment (reduction or increase) depending on market conditions.

Tags: Oil economy; disadvantages of oil; depletion of oil reserves; OPEC (Organization of Petroleum Exporting Countries); alternative sources of energy;

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