The BP Oil Spill
The gasoline market has experienced a sharp decline in demand over the month of October, and with the recent impact of super storm Sandy, demand is dropping even further. Most individuals impacted by the storm are stuck in their homes, unable to travel to work or elsewhere. This accompanied by record unemployment numbers means less and less people are traveling along the roads. In turn, people have less money to budget for travel and vacations as well. This has directly affected hedge fund managers and investors who bet heavily on oil and gasoline this year. Returns are expected to be lower than normal, and investors have cut back their forecast for this quarter.
The entire BP oil spill ties in nicely with how firms advertise and build a brand. Public image is extremely important, and that have been numerous examples throughout history that will back this up. One mistake, no matter how big or how small, can ruin a company and make them go under. During the BP oil debacle, many individuals completely boycotted the company. Their stock plummeted, and the future didn’t look bright for the company. During this time, BP released a series of advertisements apologizing for the event, and vowing to help those effected. While these ads were a small step in the right direction, not everyone was pleased. Fast forward to late 2012, and it seems BP has been able to recover quite nicely. Their stock values continue to rise, and they are looking to rebuild their brand and public image. Many of these efforts are taking place through advertising on television and other mediums like the internet. The brand has taken a big blow, but large amounts of money are being used to build it back up.
The oil giant BP is looking to rebound with investors after its terrible publicity during the Deepwater Horizon debacle. On October 30, BP held a press conference in which they bolstered increased dividends and they promised significant future growth. Investors seemed to like the news, as their shares increased over 3% for the day.
Oligopolies
The oil industry as a whole is generally seen as an oligopoly. There are only a few sellers that control the entire market. The oil and gas industry is controlled by a few main competitors like Saudi Aramco, ExxonMobil, and BP and a few other key companies. When something like a natural disaster happens, it can affect all companies within that market. When demand is lowered like with hurricane Sandy, the companies within the industry will look to decrease their supply that way they don’t have millions of barrels just sitting around. Even though laws promote healthy competition, oil companies may have to work together when such disasters occur to limit aspects such as supply. While no actual collusion may take place, they oil companies may make similar decisions that affect their prices and supply and help limit loses.
