The Shell Oil Company: Fuel Oil Cargo Transportation Cost Minimization

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  • Topic: Petroleum, Petroleum industry, Royal Dutch Shell
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STRAYER UNIVERSITY

THE SHELL OIL COMPANY: FUEL OIL CARGO TRANSPORTATION COST MINIMIZATION

A TERM PAPER SUBMITTED TO
PROFESSOR FARAMARZ FATHNEZHAD, PH.D.
QUANTITATIVE METHODS FOR BUSINESS
MAT540 007016
WINTER 2006

BY

ALPHARD VICTOR T. ROMERO

ALEXANDRIA, VIRGINIA

MARCH 2006

Contents

Chapter
1. Introduction…………………..…...…………..……………………..………..2 2. The Case Of Shell Oil Company……………………………….…...……..….3 3. The Case Figures And Calculations.……….…………………….….......….…5 4. Conclusions……………………….…….…………………………..…………9 Bibliography…..………………………………….…………….………………………..10

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CHAPTER 1 - Introduction

In today’s competitive global business environment, more and more business organizations have realized that the creativity and ingenuity needed to develop new products, provide better services, grow market share, and maintain a competitive advantage can best come through an effective practice of management science (Strohmeier n.d.). One of the known and established firms who have practiced and maximize the use of the management science application is the Shell Oil Company. The Shell Oil Company is an affiliate company of the petroleum-chemical giant firm Shell Group, a global firm that operates in more than 140 countries and territories worldwide and spans its operations in different subsidiaries and divisions. The Shell Oil Company, with its corporate office headquartered in Houston, Texas, is one of the leading oil and gas producer and distributor in United States. It operations covers production, refining and distribution of various oil, chemical and natural gas to various part of the country, and supplies almost a quarter of petroleum-chemical energy sources in the whole United States. From its earliest beginnings, The Shell Oil Company had been supplying fuel oil and gasoline products to various fuel retailers across America. It distributes various grades of petroleum and oil products that are being used by America’s motorist day in day out, and set out supplies of fuels being used by vehicles, so that drivers can drive their cars everyday (Pollar, Gonzales 1998). The following case is just a basic example how the Shell Oil Company, typically makes a basic management science calculation with regards to distribution of their fuel oil products in certain parts of the country. -2-

CHAPTER 2 – The Case Of Shell Oil Company

The oil and petroleum-chemical business like other businesses depends on its raw products suppliers to effectively distribute and sell their finished products. Oil production and distribution is a global business. Although the United States is known as one of the worlds petroleum producing country in the world, it oil and petroleum supplies are still supported by imported crude oil that are carried by huge tanker ships from other countries, across the oceans to different oil refineries in the United States. These oil products are transported and shipped in terms of millions to billions or barrels, to various oil terminals and refined into various product grades, then distributed to be sold to various consumers (Mosley 2000).

In a very basic simple case of oil transportation and distribution calculations, The Shell Oil Company, like other oil companies in the United States, also imports oil from other countries, aside from the oil it drills from the Gulf of Mexico. This firm also depends on foreign oil supply to augment the growing demands of petroleum consumption to its consumers. Two of the many suppliers of oil to Shell Oil Company are the PetroBras Company of Brazil, and the Petroleos de Venezuela, or known as the Oil Company of Venezuela. Both Brazil and Venezuela, like the Oil producing nations of the Middle east, also supplies a growing percentage of oil products to world, and the United States, with its trade agreements with these countries, purchase oil to support the demand of energy in the country.

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