Production Cost Of Production Costs

Oil is the product that each and every one of us use. It can be used for fuel, heating and even cooking. The most often known for unstable price is crude oil or gasoline. According to the The Economist, The main reason for price shifts of oil is oversupply. The oil production in Saudi rose 10.3 million barrels per day. This increase is the effect of a new method that I being applied to oil extraction. This method is called fracking, fracking is where they drill into tight-rock formations then gradually turning horizontal for several thousand feet more. This results to accommodations to multiple oil wells. This new approved method of oil harvesting has raised the productivity gains and reduced the cost of harvesting oil.

The fluctuation of gas prices occurs because of a number of factors; the price of crude oil, the price of manufacturing, the price of corn is all tied to the price of oil and the price we see at the pump for gas.

• Elastic, With the local gas stations there is competition for business as the commodity itself has little to no substitute the option of whom to buy the gas from now becomes what is elastic about this precious resource. The necessity of the good is paramount the prices of the gas at particular gas stations become the substitutes, almost phantom products if you will.

While oil and natural gas are fossil fuels that release harmful greenhouse gases into the atmosphere, these energy sources are cleaner than coal, which is on the decline as fracking expands. Indeed, coal production fell thirteen percent from 2007 to 2012, as did nitrogen dioxide and sulfur dioxide production. Moreover, pipeline transportation of oil and natural gas is significantly safer than traditional freight methods, which have devastated many communities around the world and cost millions of dollars.

The supply and demand are the main driving forces within this market, it can cause a change instantaneously overnight, and these cost issues are immediate to the consumer. There could be a fire in one of the local refineries causing product shut down, this can create a panic at the pump as well. There are many reasons why this product is so volatile, it cost too much money to refine and thereby is restricted in the method of refining. Supply means that there is a large supply available for product usage, pricing goes down, too much product, if the Demand is exact opposite occurs and there is short supply and the pricing is extremely quick to be changed at the pump. The markets can be also affected; they can be changed no matter how far the original production occurs, economics are disturbed, countries global markets respond to higher cost factors to operate business development causing inflation to jump to higher records slowing down global progress.

The problem with this formula is not all of these components contribute equally. So let’s take a look at each of these components and what economic impacts have on that mentioned gallon of gas .Crude oil is 69% of the cost and those cost exist of finding it, getting it out of the ground, and transporting it to the refinery. Refining the crude oil cost another 6%. Selling the gasoline is 10%

Crude oil comes from plants and animals that have died millions of years ago. The heat and pressure turns most of the materials into a thick dark oil called crude oil or it is also called petroleum. There are three types of crude oil: Heavy crude oil, which is found in Lloydminster and in Kindersley, medium crude, oil is found in southwest Saskatchewan, and light crude oil is found in Weyburn, Estevan and Kindersley.

The demand of gasoline has increased steadily over the last twenty years. In 1981 the U.S. averaged 6.5 million barrels of gasoline consumption per day. By comparison, in 2004 the U.S. averaged 9.2 million barrels of gasoline consumption per day. For most of this time period, gas prices stayed relatively the same. This is because the U.S. refineries increased their production to meet the demand and maintain the equilibrium price. Also during this same time period worldwide demand for crude oil increased 27%. Crude oil producers also increased their production to meet the demand keeping prices the same.

It turns out that the market for natural gas is a very competitive one and that there is in fact a shortage in supply that is causing the price to increase. Natural gas must be drilled for and there are only a certain number of active companies that drill and they all have a set amount of capital. In the short run the supply of natural gas is very inelastic because they cannot just produce more gas. They would need

Elasticity of supply is measured as the percentage change in quantity supply divided by the percentage change in price .

Gas Prices affected by Geopolitics and Supply problems Along with the demand for oil rising, many disruptions to the supply have created bottlenecks. For example, the war in Iraq has resulted in reducing oil production there, as has also happened in Nigeria due to rebel activity. The continuing nuclear weapons wrangle with Iran, the government increasing its control over industry in Russia, and the oil companies being nationalized in Venezuela has given rise to misgivings about future supplies.In recent years, refining crude oil in the US has also become more expensive, with experts citing two main reasons for this: congressional mandates resulting in shifting towards the production of more environmentally clean gasoline blends, and the oil refineries on the Gulf Coast being devastated by Hurricanes Katrina and Rita in the year 2005. In addition, the production of crude oil in America has also become costlier since the places that have been easiest to drill have largely gone dry.This means that oil companies have to go increasingly into offshore oil producing areas such as the Gulf of Mexico, which cost much more to drill in. With oil companies having to access harder to reach locations, which makes it costlier to produce oil, and simultaneously them being forced to reduce their

With supercritical water extraction and treatment, the heavy crude is upgraded to a medium to light crude that is higher value and can be further refined at more facilities worldwide. In addition, it can be transported and stored using 'conventional' crude infrastructure already in place and leverage that capital and operating investment.

Sour crude is considered unstable and must be stabilized by removing hydrogen sulphide gas from the oil before transporting in oil tankers. Usually crude oil is processed and refined to form heavy oil such as diesel and fuel oil to reduce processing cost (Investopedia US, A Division of IAC 2014).

Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand.

CO2 is one the gases in the greenhouse gas family and with “a stronger greenhouse effect [it] will warm the oceans and partially melt glacier and other ice, increasing sea level” (Climate Change). As humans continue to emit greenhouse gases into the air it is inevitable that sea levels will raise, temperatures will increase throughout the globe, and ultimately change the climate drastically damaging many ecosystems and impacting the way in which humans live on Earth. Many make the argument that the reason fossil fuels are the primary source of energy is due to their density amount of energy, but there is another source of energy that has energy even more dense than fossil fuels.