The objective of this project is to determine how forces of supply and demand interact to determine the price of oil, discuss factors that propagate the fluctuation of oil prices, and explore how Cal can ensure profit maximization amid stiff market competition from a gas station that offers oil at a relatively lower price. Furthermore, my project seeks to determine my level of proficiency and gaps in personal leadership assessment, goal setting, implementation, and strategic decision making.
To accomplish the aforementioned objectives, I used the demand and supply analysis model and the profit maximization model to demonstrate oil price fluctuations. I filled a proficiency assessment table to determine my skill gaps. The results of this project were used to identify decisions that optimize a firm’s profitability and develop interventions that would better my proficiency in leadership and decision making. Through the plotted supply and demand curves, I determined that the equilibrium price and quantity were $60.00 and 102 million barrels of crude oil respectively. After factoring a shift in demand, the equilibrium price and quantity changed to $85.00 and 107 million barrels of crude oil respectively. Since demand is price elastic, the profit margin increased until the quantity sold was 4000 gallons, after which the margin plummeted. Also, maximum profits were obtained when the marginal cost was lower than the marginal revenue . In addition, the project determined that the demand and supply of crude oil depend on a plethora of factors that include price fluctuation, price wars, and conflicts between nations. The proficiency assessment determined that I need to work on my ability to organize presentations and documents clearly and making strategic decisions that foster the attainment of organizational goals.
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The background research and findings of this project show that oil prices can be affected by conflict, trade wars, political hotbeds, weather, and forces of demand and supply. Given the level of market competition in the oil industry, Cal Overhaut can attain optimal profits by ensuring that the marginal cost is lower than the marginal revenue. I would recommend that Cal Overhaut adopts should sell the oil at a price point that ensures the marginal cost is equal to or less than the marginal revenue.
