Jonathan Companiados

MM2-Marketing Management Mr.Pendon

CASE STUDY

-Effect of oil price hike realtive Of the bombing to Saudi arabia.

SITUATION

Crude oil supplies still a major fuel for the world’s economy despite efforts to expand away
from it are again in unknown territory. For the Philippines, as it is for many countries for the
world that are dependent on imported oil, this is an unsettling development. Crude prices – to
the extent that they will rise will create challenges for macroeconomic management. They
could disrupt and scale down, well-laid economic plans.

PROBLEM

A major interruption for world oil supply. An attack this weekend on the Saudi oil processing
facility damaged it badly, causing 5.7 million barrels of daily output effectively taken off the
world supply. This is the largest single event disruption of oil supply for the world economy,
Saudi Arabia accounts for five percent of the world’s oil refining production capacity, but a
larger part of world petroleum reserves. Saudi Arabia accounts for five percent of the world’s
oil refining production capacity, but a larger part of world petroleum reserves.

ALTERNATIVE

Luckily, there are strategic security reserves. Some countries would have to make some of
that adjustment, including the major producers who stock up on their security needs. This
disruption of oil supplies will mean more periodic and larger swings in prices of essential
industrial raw materials affected by oil. The attack happened on a weekend when markets
were closed. The price of crude spiked with initial highs of 20 percent and then cooled and
ended, with the price of Brent crude up 10.4 percent at $66.4 per barrel and that of US oil up
9.8 percent at $60 a barrel.

DECISION
These are only initial first day price reactions. As the consequences and the response to this
event become more known, there could be more changeful. Would there be a military
counter-strike? Is there a danger of a regional war expanding? Could such a problem go
beyond the region? The potential impact on the Philippines on a number of occasions, this
line has referred to the regional wars and fire in the Middle East as threatening to the oil
supply, and to world peace.

EXECUTION

Despite some element of diversification away from oil, much of the current productive
technology in use in our world is still based largely on petroleum and other carbon-based
fuels. All carbon-based fuels have some price links among themselves. Any increases in the
pricesales of crude oil on the market also affects the pricing of other fuels based on carbon.

REVIEW

Supply could interrupt in having continuous supply of the fuel. Even if it is available, when
interruption occur, the price of carbon-based fuels also go up. Such price increase would lead
to secondary effects. Services dependent on this fuel – transport, electricity, other utilities --
and processed goods would be affected. In short, this is likely to have an inflationary impact.