Because of its seemingly insatiable "addiction to oil," in the past the US was and still purchases crude oil primarily from countries in the Middle East. It is said that each day, the average payment to the tune of almost $1 billion a day leaves US shores to finance oil purchases, which is known to be the greatest outflow of wealth in the world. However, oil consumption in the US and elsewhere has been on the decline thanks to the development of alternative fuels, including bio-diesel, bio-fuels, solar power, and battery-based electric technologies. Another reason world oil supplies have risen, which you might be aware of is the practice of fracking and shale oil production in the US and Canada, which is a relatively new innovation. The use of newer technologies to extract oil has had far-reaching, multi-pronged effects that include:

2. An increase in the world oil supplies;
4. Reduction in the price of gasoline all over the world, including in the US where it sells for less than $2.50/gallon, which you must have witnessed, and
6. A reduction in the dependence of Middle East oil, which has the potential of severely mitigating global geo-political power plays and influence, regional conflicts and hegemony (e.g., Iran, Iraq, and Saudi Arabia etc.).

With the increase in global oil supplies, the economies of Saudi Arabia, Iran, Iraq, Russia, Nigeria and even Venezuela, among others, have been severely impactedsome are said to be on the verge of bankruptcy and economic disintegration due to the reduction of revenues and profits they earn from crude oil, which is selling at much lower prices. (Once priced at over $100 a barrel, crude oil prices fell to $45 per barrel and now is in the $60 range.) If you have been following the current news, you will have learnt that the Venezuelan economy has been decimated and verge of collapse due to the drop in oil prices. In a similar vein, with Russia already reeling from economic sanctions imposed on it due to their war with their ally Ukraine over the annexation of Crimea, the Russian economy, which is dependent on the export of oil and natural gas, has also suffered a double-whammy due to the drop in oil prices. Indeed, it is also said to be on the verge of devastation. (President Putin claims that this is the outcome of a political conspiracy of western countries to undermine Russia as well as sow the seeds of unseating Putin as President.)

With respect to oil producing countries, here are some additional facts to bear in mind:

2. In many countries, oil is a natural resource that is owned by state-run governments or kingdoms, and is considered an asset owned by the people;
4. Some oil-rich countries, such as Saudi Arabia and Kuwait, have tremendous capital reserves, and its citizens do not pay income taxes. In essence, these economies, are run on oil revenues.
6. Other oil-rich countries, such as Venezuela and Nigeria, which are dependent on oil-revenues could collapse due to lower oil prices.
8. The cost of oil extraction differs vastly. For example, shale oil extraction is far more expensive than extracting oil from desert and sea-based reserves, which is much less costly.
10. Oillike any other productis a business. And just as companies compete with one another, so do oil producing countries compete for multibillion dollar revenues and profits in which the stakes are EXTREMELY HIGH!!!

DISCUSSION EXERCISE QUESTIONS ON PRICING STRATEGY

1. WHAT PRICING STRATEGY CAN BE EMPLOYED BY THE MAJOR OIL PRODUCING COUNTRIES AS A RESPONSE TO THE INCREASE IN SHALE OIL SUPPLIES FROM CANADA AND PRIMARILY THE US? JUSTIFY YOUR DECISION BY OFFERING SOLID RATIONALE IN DEFENSE OF YOUR THOUGHTS.

Indicate Word Count, (e.g., Words= 300) [minimum or more if you desire. The more ELABORATE AND EXTENSIVE your response, the better. DO NOT count the number of WORDS in each QUESTION as part of your response.]

REMEMBER: If POST 1 is NOT received by Wednesday 11 pm, the whole Assignment will receive a 0/15 even if you submit POST 2 by Friday 11 pm.

2. WHAT IS THE BUSINESS RATIONALE FOR SELLING CRUDE AT AN EVEN LOWER PRICE POINT THAN CURRENT PRICES? JUSTIFY YOUR DECISION BY OFFERING SOLID RATIONALE IN DEFENSE OF YOUR THOUGHTS. COULD SOME COUNTRIES HAVE ULTERIOR MOTIVES IN THE PRICING OBJECTIVES TO SELL OIL AT THE BREAKEVEN PRICE POINT OR EVEN LOWER PRICE AT A LOSS? JUSTIFY YOUR DECISION BY OFFERING SOLID RATIONALE IN DEFENSE OF YOUR THOUGHTS. (PERSONALLY, THERE'S SOMETHING FISHY!!! DOES ANYONE ELSE PERCEIVE THERE ARE CONSPIRACY THEORIES AT WORK? LOL!!!)

Indicate Word Count, (e.g., Words= 300) [minimum or more if you desire. The more ELABORATE AND EXTENSIVE your response, the better. DO NOT count the number of WORDS in each QUESTION as part of your response.]

POST 1 (Worth 10 points)

POST 2 (Worth 5 points): Remember to reply to at least one other student's post, who may ask you for an explanation on your discussion post; or write a comment to a student after reading their post with a perspective you would like to share requesting an explanation. Indicate Word Count, (e.g., Words= 200; minimum or more if you desire.) The more ELABORATE AND EXTENSIVE your response, the better. DO NOT count the number of WORDS in each QUESTION as part of your response.]

Answer rating: 100% (QA)

Question 1 WHAT PRICING STRATEGY CAN BE EMPLOYED BY THE MAJOR OIL PRODUCING COUNTRIES AS A RESPONSE TO THE INCREASE IN SHALE OIL SUPPLIES FROM CANADA AND PRIMARILY THE US JUSTIFY YOUR DECISION BY OFFE... View the full answer