Future Supply and Demand for Crude Oil To complete this project st Price per barrel Daily US demand for crude oil (in millions of barrels per day) Daily US supply of crude oil (in millions of barrels per day) $30.00 1 0.7 $35.00 0.9 $40.00 0.8 0.9 $45.00 0.7 1 $50.00 0.6 1.1 $55.00 0.5 1.2 $60.00 0.4 1.3 1. Based on the informatio in the space below. This inf barrel and the supply and d price and quantity and pric for profit maximization. 2. The global demand for o For the past several years, the can observe this change grap Support your statements with 0.8 3. What are potential supp 4. Is the global oil and gas m references. Be as descriptive as possib Data from https://www.iea.org Show your work below. Question 1: Oil Supply and Demand 60 50 40 30 20 10 0 0.2 0.4 0.6 0.8 1 1.2 Daily US demand for crude oil (in millions of barrels per day) Daily US supply of crude oil (in millions of barrels per day) Equilibrium: Question 2 1.4 Question 3 Question 4 To complete this project step, address the following: 1. Based on the information provided from the International Energy Agency (IEA) in the table on the left, examine the sup in the space below. This information is helpful for our client ExxonMobil to know how much oil to produce. The graph sho barrel and the supply and demand for the number of barrels in the united States per day. After you have examined the gr price and quantity and price at which equilibrium exists. This information is important for the client to determine the qua for profit maximization. 2. The global demand for oil changes with the changes in global economies. As economic activity increases, the global de For the past several years, the global demand for oil has increased (https://www.iea.org/oilmarketreport/omrpublic/). As the global can observe this change graphically. What changes are expected in the short-term? To answer this question, please see https://www Support your statements with research and references. 3. What are potential supply and demand risks in the global oil market? Support your statements with research and refer 4. Is the global oil and gas market in a monopoly, oligopoly, or competitive economic model? Why? Support your statement references. Be as descriptive as possible and credit any sources you use. 1.2 r day) ay) 1.4 he table on the left, examine the supply and demand graph w much oil to produce. The graph shows crude oil prices per day. After you have examined the graph below, identify the t for the client to determine the quantity of oil to produce omic activity increases, the global demand for oil increases. marketreport/omrpublic/). As the global demand changes, we r this question, please see https://www.eia.gov/outlooks/steo/. statements with research and references. model? Why? Support your statements with research and Cal Overhaut operates an ExxonMobil gas station franchise in Fitzhugh, MD. The price of gasoline is volatile and varies greatly from day to day. The price per gallon varies based on the seasonal blend of gasoline, which is determined by clean-air requirements. Cal's pricing options are based on the desired profit margin. Conventional Gasoline Regular Spot Prices can be found at https://www.eia.gov/dnav/pet/hist/EER_EPMRU_PF4_Y35NY_DPGD.htm. Cal recently raised the price of regular gas by 10 cent per gallon from $2.658 to $2.758, and his revenue decreased and profit increased. Cal would like you to explain why that happened. Cal competes with another gas station across the street that typically sells regular gas for 2 to 3 cents per gallon less than his station. They are currently selling gasoline for $2.458 per gallon. Recently, regular gasoline for delivery in New York harbor sold for $1.517 per gallon. Cal tells you that his gas station has fixed operating costs of about $438 per day. To the right are the components that determine the cost of a gallon of regular gasoline to Cal's business. Answer the seven questions below. You are required to use Excel for all calculations. 1. Last week, Cal sold an average of 4,000 gallons per day at an average price of $2.658 per gallon. This week, he raised the average price to $2.758 per gallon. His station is now selling an average of 3,600 gallons per day. Fixed costs of operating the gas station are $438 per day. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? (Profit is revenue minus total cost.) 2. After seeing your analysis, Cal decides to lower the price of gas from $2.758 to $2.558 per gallon. After this change, the volume sold increased to 4,400 gallons per day. He asks you to measure his business gains or losses as a result of this price change. Fixed costs are $438 per day. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? (Profit is revenue minus total cost.) this change, the volume sold increased to 4,400 gallons per day. He asks you to measure his business gains or losses as a result of this price change. Fixed costs are $438 per day. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? (Profit is revenue minus total cost.) 3. After seeing the result (from question 2), Cal decides to lower his price once again from $2.558 to $2.458 per gallon. Once again, volume sold increases and settles at 4,800 gallons per day. He is worried that any further price cut will cause the discount station across the street to also lower it price. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? (Profit is revenue minus total cost.) 4. Cal's son is studying in the MBA program at UMUC. He tells his father that profit maximization occurs when marginal cost (MC) = marginal revenue (MR). Cal understands that his marginal cost is the same as his variable cost, or $2.158 per gallon. Technically, marginal cost is the added cost from selling one more gallon. Cal asks you for a chart to show how profits vary with sales volume, assuming that he sells an additional 400 gallons for each 10 cent decrease in price. Also, he wants to know by how much he can lower his price without losing money. Given that you know the price and quantity of gallons sold so far, and that Cal's cost per gallon is $2.158 per gallon and his fixed cost is $438 per day, complete the table to the right. 5. Once you calculate total profit, what is the profit maximizing price? 6. Next calculate marginal revenue, knowing that it is the difference between the revenue at the price shown and the revenue at 1/400 of a cent less. Calculate 1/400 of a cent as well as the new price. Calculate the marginal cost of selling zero point one (0.1) more gallon at each price. Prove that MC = $0.2158 Complete the table to the right. 7. What advice can you give to Cal on setting prices to maximize profit? 7. What advice can you give to Cal on setting prices to maximize profit? Select One Price Elastic Price Inelastic Unit Price Elastic Profit Maximization gasoline is volatile nd of gasoline, esired profit margin. Base price of unleaded regular delivered in New York harbor (January 27, 2020) and his revenue Added cost to Cal: Maryland state gasoline tax (Effective July 1, 2018) Federal gasoline tax Distribution & Delivery Advertising and Marketing to ExxonMobil Additives Total additions r 2 to 3 cents per ently, regular Total cost per gallon o Cal's business. per gallon. This rage of 3,600 gallons Answer question 1 below. Quantity Price 4000 2.658 3600 2.758 Average Average % change % change Elasticity of Demand Elasticity: By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Gallons sold per day 4000 3600 per gallon. After his business gains Price $ Revenue (price x gallons) Cost per Gallon 2.658 $ Answer question 2 below. Quantity Price 3600 2.758 4400 2.558 Average Average 10,632.00 $ Variable Cost (cost per unit x volume) 2.158 $ 8,632.00 his business gains om $2.558 to $2.458 worried that any ximization occurs ost is the same as selling one more ells an additional e can lower his price r gallon is $2.158 % change % change Elasticity of Demand Elasticity: By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Gallons sold per day Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost per unit x volume) 3600 4400 Answer question 3 below. Quantity Price 4400 2.558 4800 2.458 Average Average % change % change Elasticity of Demand Elasticity: By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Gallons sold per day Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost per unit x volume) 4400 4800 Profit Maximization Gallons sold per day 2400 2800 3000 3200 3600 4000 4400 4800 5200 Price $ $ $ $ $ $ $ $ $ Revenue (price x gallons) Cost per Gallon 3.058 $ 2.958 2.908 2.858 2.758 2.658 2.558 2.458 2.358 7,339.20 $ Variable Cost (cost per unit x volume) 2.158 $ 5,179.20 nue at the price new price. ove that MC = 5600 6000 6400 6800 7200 7600 8000 8400 8800 9200 $ $ $ $ $ $ $ $ $ $ 2.258 2.158 2.058 1.958 1.858 1.758 1.658 1.558 1.458 1.358 Answer question 5 below. Marginal Revenue Gallons sold per day Price 2800.0 2800.1 $ $ 2.958000 2.957975 3000.0 3000.1 $ $ 2.908000 2.907975 3200.0 3200.1 3600.0 3600.1 4000.0 4000.1 4400.0 4400.1 4800.0 4800.1 5200.0 5200.1 5600.0 5600.1 Revenue (price x gallons) Marginal revenue Cost per gallon $8,282.40 $8,282.63 $0.2258 $2.158 $2.158 $1.517 $0.353 $0.184 $0.042 $0.042 $0.020 $0.641 $2.158 Fixed cost per Total Cost (Fixed day + Variable) $ 438.00 $ 9,070.00 $ Daily Profit (revenue - all costs) 1,562.00 Fixed cost per Total Cost (Fixed day + Variable) Daily Profit (revenue - all costs) Fixed cost per Total Cost (Fixed day + Variable) Daily Profit (revenue - all costs) Fixed cost per Total Cost (Fixed day + Variable) Daily Profit (revenue - all costs) on $ 438.00 $ 5,617.20 $ 1,722.00 Marginal Cost Variable Cost Fixed Cost Total Cost Marginal Cost $6,042.40 $6,042.62 $438.00 $438.00 $6,480.40 $6,480.62 $0.2158