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Reutter Case Case Solution

Introduction

Organization of petroleum exporting countries (OPEC) group consists of the world’s largest oil exporting countries. It was founded in 1960’s by the five founding members; Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. However, it also has nine other members that are also exporting huge oil around the world. Similarly, the aim of founding the OPEC was to coordinate policies of the petroleum states, and provide technical assistant and economic aid to those member states to further strengthen their production of the petroleum in accordance with the international standards, and by caring the surrounding environment.

On the other hand, the group has been found to regulate the production oil in the member countries and to ensure that all operations are carried as per the guidance of group. Similarly, the Group is also responsible for reacting the market’s fluctuations. It also takes decisions regarding the production, and price of the oil as a whole. Apart from that, the group’s main aim is to collectively manage the overall production of the oil to avoid the competition among the countries that could have a negative impact in theglobal market.

In case if the price of oilis reduced over time in the global market, then, it would not have an impact on the oil producing companies, but it would also have an impact on thegovernments because their revenues would decline with respect to the reduction in oil prices. Thus, it could be determined that if the price of oil either increases or decreases, then it would have an impact positive or negative over many industries globally.

However, it is important that what impact does a particular region bear given the fluctuations in oil prices, and what impact would it have on the commodities’ prices, production prices, and the equity markets as well. All these are measured in the OPEC to react to the market to increase the oil prices to support the member countries’ declining revenues in the global market that might have a direct or indirect relationship with prices.

Background

The study is solely based on the empirical data about the oil producing countries, and experiences, and facts that had an impact on the global market. However, the topic of the study is to analyze the that how fluctuating prices of the oil following the OPEC meetings has had an impact on the stock price of oil companies, and other industries in Russia, and on some countries in Eastern Europe. Furthermore, it could be said that prices of the oil depend on the supply in the world.

However, following a reduction in prices could be the result of the high supply of the crude oil in the market which had given rise to the price reduction. Similarly, the oil producing countries are supposed to look at the global market as a whole. On the other hand, since January 2015 oil prices have reduced from $110 per barrel to $28 per barrel. Whatever reason was behind the reduction in oil prices is another debate. Nonetheless, the how does market especially the oil producing countries reacted to that fall of prices is imperative.

The countries that have founded the OPEC have to measure the risks, and respond as required or agreed with the member countries. See Figure 1. The figure shows the countries that are the members of OPEC and non-OPEC members as well. If we analyze the following meetings of the OPEC members over the sudden reduction in oil prices, then it can be seen that it was agreed that if the OPEC members have to respond the market to cut the combined production by 1.7 million barrel per day,then it would be logical, and reasonable to reduce the production of petroleum in the member countries to support the declining revenues of the governments.

Qualitative Analysis

United States, Russia, and China are also oil producing countries that might not have a negative impact, becausethey would only just regulate their countries. However, it is critical to look at the industry as a whole. It is also important to come across that either demand in the market has declined or the supply has increased, but it could still be said that the crude oil per barrel was stable at $110 until 2014. Nonetheless, since early 2015, oil prices globally have increased up to $40-$45 per barrel in the global market. Similarly, if further analyzed it could be seen that the global market’s effect would have affected other industries worldwide...............................

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