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Pakistan’s economy has been growing at a very stable rate from last few years and this growth is demanding higher energy consumption and thus putting a huge pressure over country’s limited energy resources. Oil is one of the primary energy resources of the country. Attock Oil Company Ltd., Dewan Petroleum Ltd., Oil & Gas Development Company Ltd., Mari Gas Company Ltd., Shell Development & Offshore Pakistan are major suppliers of oil in Pakistan. Due to higher oil consumption, country also imports large quantity of oil every year to meet domestic demand of oil. Decreased oil prices in last 3 years have contributed significantly in growth rate of the country. Due to rise in international oil price from last 4 months, domestic oil prices also increased abruptly and reached at level of Rs. 77.47 per liter.
Keeping in mind the characteristics of four market structures discussed in lectures, you are required to identify in which market structure domestic oil companies are operating out of four market structures. If domestic oil prices continue to rise in future, then what will be its impact on cost of basic necessities of life in the country?
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I think Oligopoly or Cartel market structure domestic oil companies is operating If domestic oil prices continue to rise in future then it will be impact on cost of basic necessities of life in the country is that The cost of food rises as well, partly because oil is used in many ways in growing and transporting food and partly because of the competition from bio fuels for land, sending land prices up. The cost of shipping goods of all types rises, since oil is used in nearly all methods of transports. The cost of materials that are made from oil, such as asphalt and chemical products, also rises If the cost of oil rises, it tends to raise the cost of other fossil fuels. The cost of natural gas extraction tends to rises, since oil is used in natural gas drilling and in transporting water for frocking. Because of an over-supply of natural gas in the country, its sales price is temporarily less than the cost of production. This is not a sustainable situation. Higher oil costs also tend to raise the cost of transporting coal to the destination where it is used.
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It is an oligopoly market... because
according to definition... Oligopoly market means.. Small number of Large companies and similiar in nature.
If the price of Oil will rise in future, then price of basic commodities will also increase and vice versa...
how prices are affected
Requirement:Requirement:Market Structure : Oligopoly or CartelHow Oil Prices Affect Cost of Basic Necessities of Humans. Now-a-days basic necessities of humans, in Pakistan and all over the world are mostly linked with transportation, either one or the other way. Humans need lot many consumer goods on daily basis to fulfil their humanly requirements which they have to gather from various places. Effects on Agriculture. Majority of our society, living in rural areas is absolutely dependent upon agricultural sources of living and income. To get better production from agriculture, the role of modern machinery, mostly driven by fuel and petroleum is of paramount importance. Increase in oil prices will affect this sector as well. Work Places. If the oil prices go high then driving to work places will become even more expensive and stressful. This will cause anxiety to workers about keeping their job and maybe thinking about other easy options.Clothing. All textile mills and looms are working on petroleum, for making the refined stuff for people’s wearing. If the cost of oil goes high, it will definitely rise the prices of clothing which will be troublesome for the consumers to afford while living in meagre and scanty resources.Impact of Oil Price on Food Items Prices. It goes without saying that our food system is highly fuel and transport-dependent. Extraordinary fuel rates are making our highly fuel-dependent production system, less protected and food itself less affordable. Our production units use oil products to provide energy to farm-machinery and transport the efforts to farms and conveyance of farm production to consumers.