Final MGMT 1035: Week 11 Flashcards
Oil Indusry
What is gasoline?
Gasoline is a byproduct of the refining of oil into kerosene
In 1953 The C.I.A. and British Intelligence organized the overthrowing of what countries government?
Iran.
due to Iran nationalizing their oil industry
Overthrow of Premier Mohammad Mossadeq with CIA and British support because of his support for the SOVIETS
In Canada the original oil industry was created in what region?
Southwestern Ontario
The U.S. Energy Information Administration (EIA) defines spare capacity as…
The volume of oil production that can be brought online within 30 days and sustained for at least 90 days.
The oil embargo of the mid 1970s was sparked by what international event?
The Yom Kippur War.
In 2022 which country had the highest total oil reserves?
Venezuala.
Willian Knox Darcy developed British Petroleum to exploit the oil resources of what country?
Persia (Iran)
What does a spot transaction in crude oil refer to?
On the spot purchase of a single shipment
“Upstream” Oil and Gas companies…
identify, extract, or produce raw materials.
Who brought commercial production to Germany
1880s Carl Benz
Carl and Bertha Benz, 1880s
built wagon, coaches, and developed the first internal combustion engine vehicle
William Knox Darcy,
o Wanted a monopoly for the extraction on sale of oil in Middle East
o Founded what became British Petroleum
o Got a monopoly by the British
Whose the founder of Standard Oil?
John D. Rockefeller
Which government breaks up Standard Oil, due to its success?
American Gov.
under the Sherman Antitrust Act of 1890
Henry Ford’s Model T, 1900s
o Becomes best-selling car in the world
o Borrowing ideas from the scientific management theory
o Dedicated assembly line building cars quickly and prices drop
Why did Iran resent Western oil companies after World War II?
paying low royalties to the Iranian government. Mossadeq sought to increase royalties
OPEC
1960: Baghada, Iraq
The Organization of Petroleum Exporting Countries
want more control over oil and want to control the world price and access of this product
Cartel
limits access to a product
A branch of Rockefeller’s Standard Oil?
Imperial Oil
When was the oil embargo launched by OPEC?
1973
refusal of the Organization of the Petroleum Exporting Countries (OPEC) to sell crude to the U.S. in retaliation for the U.S. decision to re-supply the Israeli military and to gain leverage in the post-war peace negotiations.
Which gov. made Petro Canada a government entity?
Pierre Trudeau
Which government sold Petro Canada?
50% sold off by the Mulroney conservative party and the rest by the Paul Martine Liberal party
Petro Canada was not cheaper than the American owned ones
Petro Canada Facts
o started as a Crown Corporation during the economic crisis in 1960s
o was to be a “window on the industry”
o eventually privatized
What accounts for about one-third of total world energy consumption?
Petroleum
Factors Influencing Oil Prices
- OPEC Compliance
- Consumer Responsiveness
- Competitiveness of Non-OPEC Producers
- OPEC vs. Non-OPEC Efficiency
How does Spare capacity acts as a buffer against supply disruptions?
helping stabilize prices
Price Volatility
Requires significant price adjustments to rebalance supply and demand due to this inelasticity
What is Brent oil, and why is it a benchmark?
Light, sweet oil from North Sea Europe; easy transport; low tanker costs.
What impacts Alberta’s oil royalties?
Oil price, production/transport costs; low quality, long transport; better pipelines reduce discounts.
Why does Alberta’s oil sell fro less than Brent and WTI?
- lower quality of Alberta’s oil
- Far from key refining markets, which increases transportation costs
- Improving market access
Upstream: Supply Chain Divisions
Involves identification, extraction, and production of raw petroleum materials
Midstream: Supply Chain Divisions
o Focuses on transportation and storage of crude oil and refined products.
o Connects upstream and downstream operations
Downstream: Supply Chain Divisions
o Post-production processes, such as refining crude oil and natural gas.
o Includes the creation of consumer products like gasoline, diesel, and plastics
Leading countries in Oil Reserve (2022 data):
- Venezuela: 303.8 billion barrels.
- Saudi Arabia: 297.5 billion barrels. (HOLDEST LARGEST SHARE IN OPEC)
- Canada: 168.1 billion barrels.
Extraction Methods
o Developmental drilling: Tapping known reserves.
o Exploratory drilling: Searching for new reserves.
o Directional drilling: non- Vertical drilling to target oil sources.
Petroleum Formation
o Fossil fuel created from dead organisms (e.g., algae, plants, bacteria).
o Subjected to high heat and pressure inside rock formations over millions of years.
non-renewable
Classifications of Petroleum
Unrefined Classes:
o Asphalt, bitumen, crude oil, and natural gas.
Refined Uses:
o Gasoline, kerosene, plastics, and other byproducts
OPEC Creation
Established at a conference in Baghdad, Iraq, from September 10–14, 1960
Founded Members of OPEC
Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela
OPEC’s Purpose
o Stabilize the global oil market.
o Coordinate energy policies among members.
o Ensure fair oil prices and a steady supply to the market
What happened in the 1950s oil market?
Soviet oil production increased, leading to price cuts by “The Seven Sisters” (Esso, Mobil, Standard, Gulf, Texaco, BP, CFP). Arab nations sought price stabilization
o Arab nations sought ways to stabilize and profit from oil prices.
What was the significance of the Declaratory Statement of Petroleum (1968)?
Asserted sovereignty over natural resources; supported decolonization and national enrichment.
What challenges did early oil-producing nations face in cooperation?
Struggles with export limits (1962) and political tensions like the Six-Day War (1967).
as members prioritized maximizing individual exports.
What triggered the 1973 oil embargo?
U.S. support for Israel during the Yom Kippur War. Arab OPEC members embargoed oil to the U.S., Canada, UK, Japan, and the Netherlands.
What were the results of the 1973 oil embargo?
Supply disruptions, sharp price increases, and economic shifts in global power.
What challenges did OPEC face in the 1970s?
No monopoly (56% market share) and reliance on Western companies for refining and downstream activities.
Iran-Iraq War (1980–1988
Restricted Iranian oil production; other OPEC members compensated.
oil prices rose significantly
What was the impact of Iraq’s invasion of Kuwait in 1990?
Disrupted oil supply; Saudi Arabia increased production to compensate
What is OPEC’s role in the global oil market?
Pivotal in shaping the oil market; influence fluctuates with geopolitical and technological changes.
What global conflicts affected OPEC’s oil supply?
Wars in Libya, Nigeria, Iraq, and Syria caused intermittent supply disruptions
How much barrels did OPEC attempt to restrict?
17.5 million barrels/day to stabilize prices
West Texas Intermediate (WTI)
- Represents oil produced in the U.S., centered around Cushing, Oklahoma.
- Although also a light oil, WTI is typically priced lower than Brent due to:
- U.S. export restrictions on crude oil.
What was the primary use of oil before the invention of kerosene?
Lubrication
Why did the British government grant monopoly rights for oil extraction in the Middle East to British Petroleum?
As part of a colonial strategy to extract resources
What company basically bough out the Canadian Oil industry and controlled it in the 1800s?
Imperial Oil, a branch of Standard Oil ->
Which Middle Eastern country became pivotal in the oil industry after World War II?
Saudi Arabia
What global economic event was triggered by the OPEC oil embargo in 1973?
A global economic recession
Why does Western Canada Select (WCS) trade at a discount to WTI?
Heavier oil and longer transportation distance
What is one key use of petroleum besides fuel?
Conversion into plastics
What is a major environmental concern associated with petroleum use?
Global warming due to carbon emissions
What is the significance of the Alberta royalty framework?
It determines the value Albertans receive from resource production.
Where did BP first discover oil and when?
Iran, after World War 1
Why was the search for oil in Persia costly and difficult?
devoid of infastructure and politically unstable
Which company joined Darcy in his search for oil in Persia?
Burmah Oil Company joined D’Arcy in a Concessionary Oil Syndicate in 1905
What was the first oil discovery in the middle East?
southwest of Persia at Masjid-i-Suleiman
What was BP originally founded as in 1909?
Anglo-Persian Oil Company
What resource did BP rely heavily on from countries like Iran, Libya, and Iraq?
crude oil
What treaty solidified the integration of US and Canadian energy markets in the 1980s?
Canada–US Free Trade Agreement (CUSFTA)
What technological advances drove the shale revolution?
Hydraulic fracturing and horizontal drilling
enabled the United States to significantly increase its production of oil and natural gas
What legislation lifted the US ban on crude oil exports in 2015?
A Congressional motion supported by President Obama
What was the ultimate impact of the shale revolution on North American energy markets?
Reduced US dependence on Canadian oil
Which US policy focused on increasing domestic energy exploration?
Energy Policy Act (2005)
What did Canada’s National Energy Program (NEP) aim to achieve?
Redistribution of oil revenues and energy independence
