Oil & Gas Industry_A Micro Economic View

8/8/2019 Oil & Gas Industry_A Micro Economic View

1/20

A micro-economic overview


2/20

2

` Three are three kinds of governmentpolicies designed to alter or control firm

behavior Social regulation

x

Consists of measures designed to improve health andsafety

Economic regulation

x Controls the price, the output, the entry of new firms,

and the quality of service in industries in which

monopoly appears inevitable

natural monopolies Antitrust activity

x Attempts to prohibit firm behavior that tries to

monopolize markets


3/20

3

` Because of economies of scale, naturalmonopolies have a downward-sloping

long-run average-cost curve over the

entire range of market demand

` This means that the lowest average costis achieved when one firm serves the

entire market

` Natural monopolies usually face huge

capital costs.


4/20


5/20

5

To do this, government can either operate the

monopoly itself, as with most urban transit

systems, or can regulate a privately owned

monopoly.

` IOCL is a public sector unit, and it does not focus

on profit-maximisation rather on economic

welfare.

It is Government regulated and government

owned as well. Thus it is called a public utilty


6/20

6

` In regulating natural monopolies, the

price-output combination captures the

most attention

` Suppose government regulators requirethe monopolist to produce the level of

output that is allocatively efficient, where,

price, which is the marginal benefit to

consumers, equals marginal cost


7/20

7

` The government can subsidize the firm soit earns a normal profit

` However, the drawback with this approach

is that to provide the subsidy is that thegovernment must raise taxes or forgopublic spending in some other area. Thereis an opportunity cost to the subsidyapproach.


8/20

` The Group's principal activities are manufacture and marketpetroleum products, crude oil, lubricants and grease, oil base andadditives and other petroleum related products.

` The Group operates in two segments:Petroleum Products andOtherBusinesses. Other business includes sale of imported crudeoil, sale of gas, oil and gas exploration activities, petrochemicals,

polyester staple fibre ch

emicals and engineering.


9/20

Refining: Indian Oil controls 10 of Indias 20 refineries. The group refining capacity is60.2 million metric tonnes per annum (MMTPA) or 1.2 million barrels per day -thelargest share among refining companies in India. It accounts for33.8% share ofnational refining capacity.

Pipelines: Indian Oil's cross-country pipelines network is 10,064 km in length and69.60 Million Metric Tonne Per Annum (MMTPA) in capacity. Cross-country pipelines

are globally recognised as the safest, cost-effective, energy-efficient andenvironment-friendly mode for transportation of crude oil and petroleum products.

Marketing: Indian Oil has one of the largest petroleum marketing and distributionnetworks in Asia, with over34,000 marketing touch points. Its ubiquitous petrol/dieselstations are located across different terrains and regions of the Indian sub-continent.

R & D

Petro chemicals


10/20

Type PSU (Trading on BSE &NSE)

Founded 1964

Headquarters New Delhi, IndiaKey people Sarthak Behuria, Chairman

Industry Petroleum products = Petrol, Diesel, Kerosene, LPG, Petrochemicals

Revenue . 2474.79 billion or $61.7 Billion [1] (2007-2008)

Net income US$ 1.96 billion (2007) 12.9% from 2006


11/20


12/20

CRUDE OIL PRICE TREND IN INDIA

0.00

10.00

20.00

30.00

40.00

50.00

60.00

2002 2003 2004 2005 2006 2007 2008 2009

Rs./

Litr


13/20


14/20

Revenue & Cost

0

20000

40000

60000

80000

1206.12 1135.36 1345.85 1469.57 1473.42 1468.23 1334.40

Output

Rs.(i

ncr) TV

CTR

Q308 Q408 Q109 Q209 Q309Q208Q108


15/20

OUTPUT

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

1400.00

1600.00

Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09

inMMT

OUTPUT


16/20

AVC

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

1206.12 1135.36 1345.85 1469.57 1473.42 1468.23 1334.40

AVC

Q3 0 8 Q4 0 8 Q1 0 9 Q2 0 9 Q3 0 9Q2 0 8Q1 0 8


17/20

-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

1206.12 1135.36 1345.85 1469.57 1473.42 1468.23 1334.40Rs.(in

crores)

Q308 Q408 Q109 Q209 Q309Q208

MC

Q108

OUTPUT


18/20

-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

3000

1206.12 1135.36 1345.85 1469.57 1473.42 1468.23 1334.40

OUT P UT

MC

MR

Q308 Q408 Q109 Q209 Q309Q208Q108


19/20

-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

1206.12 1135.36 1345.85 1469.57 1473.42 1468.23 1334.40

Output

Rs.

inc

rMC

AR

Q3 0 8 Q4 0 8 Q1 0 9 Q2 0 9 Q3 0 9Q2 0 8Q1 0 8


20/20

-2000.00

-1500.00

-1000.00

-500.00

0.00

500.00

1000.00

1500.00

2000.00

2500.00

3000.00

1206.12 1135.36 1345.85 1469.57 1473.42 1468.23 1334.40

Rs.(incr)

AVC

MC

AR

MR

Q308 Q408 Q109 Q209 Q309Q208Q108

OUTPUT

Oil & Gas Industry_A Micro Economic View

Documents

Transcript of Oil & Gas Industry_A Micro Economic View