Archive for October, 2008

Today’s Oil Price, Yesterday’s Supply and Demand

Thursday, October 30th, 2008

NOTE: These papers are meant to make you think and contain thoughtful opinions.

The question on everyone’s mind is, “When will oil prices decrease, if at all”? Americans are witnessing the effects of supply and demand when they purchase gasoline, home heating oil, and other petroleum products. As long as supply and demand are the only factors affecting the price of oil, we would see a stabilization of the price over time. However, today’s industry thrives on petroleum to the extent that governments must become involved in its procurement in order to insure the nation’s security. This presents a whole new facet to the supply and demand equation that will create price instability for a while to come. Due to this country’s and other countries dependency on petroleum we see less elasticity in its price.

Demand

The ideas expressed above are the foundation of the law of demand: Quantity demanded rises as price falls, other things constant. Or alternatively: Quantity demanded falls as price rises, other things constant.” (Colander, D., C., (2004), pg. 84).

The problem that one notices, when looking at this demand curve and considering the demand for oil, is that the demand for oil is not decreasing as the price increases. (Simmons, M., R., (2005), n.p.). The reason for the reverse demand curve is due to the global dependency upon oil and the lack of alternatives. Global demand will continue to increase due to the emerging economies of India and China. It will take time to decrease oil dependencies and create alternatives. In order to decrease the price of oil in the short term we must look to the supply side of the equation.

Supply

There’s a law of supply that corresponds to the law of demand. The law of supply states: Quantity supplied rises as price rises, other things constant. Or alternatively: Quantity supplied falls as price falls, other things constant.” (Colander, D., C., (2004), pg. 91). However, the supply graph for oil looks a bit different, because a conglomerate, OPEC, controls it.

The oil supply graph is a horizontal graph with decrease in production that corresponds to decreases in the price per barrel of oil. OPEC has stated they will increase the supply of oil to the market to try and offset the supply problems caused by hurricane Katrina, but the supply problem was occurring prior to the natural disaster and its impact on oil production in the Gulf Coast Region of the United States.

Price

The price of any product or service is can be determined by looking at the supply and demand graphs for that product of service. Looking at the supply and demand graphs for oil for the year 2004 we see that supply is 74 million barrels a day and demand is 84 million barrels per day. We see that there is definitely an imbalance in favor of the suppliers. This will result in a supply side shift of the graph in reference to price, because the demand is also rising. A historic oil price graph shows this shift in regards to supply and price.

(ETRG Economics, (2005), n.p.). An important aspect of this graph is the price indexing to 2004 dollars. This indexing allows for a true comparison of historic oil prices. The graph also shows that oil prices will continue to rise as long as the demand for oil is greater than the supply of oil. We will see a decrease in oil prices only when demand is decreased, which would mean a change in life-style of many Americans.

Supply and demand graphs help to visualize the basis for the price of a product or service. Oil is a non-renewable commodity. We have many “un-tapped” oil fields; however, this would only prolong the inevitable price rise to a point that economies begin to falter. The “invisible hand theory—a market economy, through the price mechanism, will tend to allocate resources efficiently,” (Colander, D., C., (2004), pg. 12) will be part of the solution to our oil problem. Our society will shift their automobile purchases from SUV’s to smaller, more fuel efficient cars and start to use mass transit in order to avoid having to pay the higher oil prices. However, order to keep the price of oil low, we need to develop alternatives to its usage, such as atomic, wind, and solar energy. We must also seek to stabilize the nations that house the oil suppliers and also the oil supply routes. I feel the War on Terrorism has only added to the instability in the oil markets, and not helped. That being said, we can expect the price of oil to climb even higher in the near future.

Reference

Colander, D., C., (2004). Introduction: Thinking Like and Economist. Economics

(5th ed.), pg. 12. Retrieved September 5, 2005 from eRsource.

Colander, D., C., (2004). Supply and Demand. Economics (5th ed.), pg. 84. Retrieved

September 5, 2005 from eRsource.

Colander, D., C., (2004). Supply and Demand. Economics (5th ed.), pg. 84. Retrieved

September 5, 2005 from eRsource.

Colander, D., C., (2004). Supply and Demand. Economics (5th ed.), pg. 91. Retrieved

September 5, 2005 from eRsource.

Colander, D., C., (2004). Supply and Demand. Economics (5th ed.), pg. 91. Retrieved

September 5, 2005 from eRsource.

Energy Information Administration, (2005). Retrieved September 5, 2005 from

http://www.eia.doe.gov/mer/pdf/pages/sec11_4.pdf.

ETRG Economics, (2005). Retrieved September 5, 2005 from http://www.wtrg.com

/prices.htm.

Simmons, M., R., (2005). 2005 oil outlook: Is this the year when demand outstrips

supply? Retrieved September 5, 2005 from http://stcwa.org.au/journal

/020405/1110805224_3789.html.

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Ethical, Legal, and Regulator Issues on a B2C Web Site Vs. a B2B

Thursday, October 30th, 2008

NOTE: These papers are meant to make you think and contain thoughtful opinions.

Business-to-business (B2B) and business-to-customer (B2C) web sites have several differences in the way information can be conveyed to their customers and how transactions need to be conducted. B2B web sites connect entities with similar technical backgrounds and well defined legal parameters for conducting business. B2C web sites must deal with the least common denominator when it comes to conducting business with the average consumer on the Internet today. This paper will examine privacy rights and obligations and communication with children and the different ethical, legal, and regulatory issues on a B2C web site in comparison to a B2B web site.

 

Privacy Rights and Obligations

Privacy rights and obligations of B2B and B2C web sites differ due to the differences in the customer base. Business Law governs B2B web sites, such as copy write and patent laws. “The Electronic Communications Privacy Act of 1986 is the main law governing privacy on the Internet today. Of course, this law was enacted before the general public began its wide use of the Internet.” (Schneider, G.P., (2004), pg. 307). This means that Internet usage by the general public is left to the ethics of the business the customer is dealing with.

 

 

 “One of the major privacy controversies in the United States today is the opt-in vs. opt-out issue.” (Schneider, G.P., (2004), pg. 308). A majority of companies’ conduction B2C e-commerce on the Internet today apply the opt-out policy, which requires the consumer to indicate to the company that they do not want their personal information used for other purposes other than the direct business transaction. The ethics of the opt-out policy has many consumers worried about giving their personal information to any business that does not expressly state the information will not be distributed to other business entities. Some web sites, like Sun Microsystems, will ask you for your email address, but will allow you to download the information you need if you decide to opt-out of providing the information.

 

 

 Businesses need to rely upon ethics when dealing with consumers. Some of those guidelines are:

·        Use the data collected to provide improved customer service.

·        Do not share customer data with others outside your company without the customer’s permission.

·        Tell customers what data you are collecting and what you are doing with it.

·        Give customers the right to have you delete any of the data you have collected about them. (Schneider, G.P., (2004), pg. 309).

 

Companies have the ability today to collect all types of data on their customers and visitors to their web sites, but in order to gain the trust of the their clients, they need to insure them there personal information is safe and will not be shared with anyone other than the company to which is was supplied. Any tracking software should be disclosed to consumers, so they can make the decision if they want to continue on the web site.

 

Communications with Children

Communication with children is a major issue with e-commerce today. This issue pertains mainly to B2C web sites as opposed to B2B web sites. B2B web sites exchange information between two contractually bound entities. However, B2C web sites need to find a method to obtain the age of their customers, since they are dealing with everyone and anyone who can obtain Internet access. The problem is, “how do you obtain the age of the consumer?”

 

 

 Child consumer laws are not only meant to protect children, but also to protect businesses. Contracts entered into by consumers not of majority age are non-binding. However, it is very difficult to check a driver’s license on the Internet. One method used to warn that a site is not appropriate for children is to post an age disclosure document on the home page of the web site, but that does not prove how old the user is who agrees to the disclosure. Another method is to require a credit card to make a purchase, but knowledge of how a credit card works is fairly common today.

 

 

The ethical and legal issues associated with communicating with minors will be best left to the child’s parents and schoolteachers. Cyber Patrol is designed to block certain web sites from minors. However, the parents need to take the time to set up the software and monitor the sites visited by their children. Government regulation will prove to be ineffective, because not all countries are willing to create this type of regulation or to enforce the regulations already in existence.

 

 

Ethical, legal, and regulatory issues will differ on business-to-business sites as opposed to business-to-customer web sites. The differences are not due to a lack of concern, but time. Business regulation is constantly changing, but it has a basis from which to evolve and e-business was just another means of conduction business-to-business transactions. However, business-to-consumer web sites are fairly recent and will need time to develop ethical, legal and regulatory measures to protect both the business and consumer.   

Reference

Schneider, G.P., (2004). The Environment of Electronic Commerce: Legal, Ethical, and

Tax Issues. Electronic Commerce: The Second Wave (5th ed.). pg. 307. Retrieved

June 25, 2006 from eRsource.

Schneider, G.P., (2004). The Environment of Electronic Commerce: Legal, Ethical, and

Tax Issues. Electronic Commerce: The Second Wave (5th ed.). pg. 308. Retrieved

June 25, 2006 from eRsource.

Schneider, G.P., (2004). The Environment of Electronic Commerce: Legal, Ethical, and

Tax Issues. Electronic Commerce: The Second Wave (5th ed.). pg. 309. Retrieved June 25,

2006 from eRsource.

 

Mike Kniaziewicz, MIS

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