Oil price

Topics: OPEC, Supply and demand, Price of petroleum, Peak oil / Pages: 4 (1163 words) / Published: Oct 31st, 2014
In the period leading to the war in Iraq, Syria and Ukraine, oil prices increased significantly as did the profit earned by many oil companies including PETRONAS. Politicians in Malaysia opposed the government policy to oil price increase by twenty cents and the withdrawal of oil subsidy.
As a manager or policy implementer, discuss the pros and cons if this policy in the context of the various theories of profit.
The government of Malaysia increased the price of oil by 20 cents and withdrawal of the oil subsidy causing the people in the country panic. This is due to they afraid the increasing price will hikes up the price of normal goods in the market. Every businesses including the oil companies aims at maximising profit. As in the wars happening in Iraq, Syria, and Ukraine, it surely is a good chance to maximise the profit. If the policy is applied, pro and cons arise from the effect of the implementation.The profitability of the oil companies is greatly influenced by the demand of the oil. The usage of oil in daily's life especially in the industrial country is huge. Consumption of the oils getting larger and shows no sign of stopping whereas this recourses will gone someday. Supply is occur when supplier willing to sell for the right price and time. If demand remains unchanged and supply decreases, a shortage of oil occurs, leading to a higher equilibrium price in the market. In which it explains that the higher the price, the more quantity of the supply. The quantity of the supply is affected by the price where it include subsidy, cost, tax and etc.
Economic equilibrium is a state where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. Using the supply theory, when subsidy is withdrawn, the price will increases and the supply will decreases. This will cause the supply curve shift to left. Quantity of demand is more than quantity

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