Photo by Artem Beliaikin on Unsplash Production of boiler chickens (those raised for their meat, not eggs) in the US...
Oil is Surging, Apple is Falling
In the wake of rising oil and gas prices globally, Saudi Aramco, the company that manages the oil supply of the Kingdom of Saudi Arabia, has recently surpassed Apple as the most valuable company in the world. Saudi Aramco is now estimated to have a market value of $2.43 trillion, compared to Apple’s market value of $2.37 trillion. While Saudi Aramco’s market value has risen in recent months, Apple’s has been declining from a peak of $3 trillion earlier this year.
The key to Aramco’s growth has been that despite the rising price of oil globally, Saudi Arabia has one of the lowest costs of oil production in the world. Thus, rising prices increase the company’s profit margins. Meanwhile, Apple has been marred by supply chain issues that are preventing the company from getting their products to market. Apple is expecting its revenue to fall by as much as $8 billion in the next quarter.
Discussion Questions:
- Is demand for oil and gas elastic of inelastic? How does that affect oil companies’ total revenues when oil prices rise?
- Describe how OPEC’s cartel power affects their ability to control market prices? What systems need to be in place to maintain cooperation in the cartel?
- Is supply of oil elastic or inelastic? What factors would determine this?
Sources| Aramco: Who We are Overview; CNN: Saudi Aramco eclipses Apple to once again become the world’s most valuable company; Kosatka: Cost of Oil Production in the World; Image by John R Perry from Pixabay
