Marathon Oil

Explain one possible option that Marathon could take to reduce the time involved in the production process.

After watching the Marathon video a few times I was amazed at how crude oil travels/process before getting into my gas tank. I learn that it takes four days to off-load the crude and four to eight days to process crude oil into gasoline and other products associated with crude oil. I don’t see anyway that Marathon can reduce the production process time since it can cause problems such as letting the gas sit too long , 50 days, before moving it to the next stage. Even though the crude oil has been processed into gasoline it is still unstable

Discuss the relationship between the retail price of gasoline and the price of crude oil.

First let’s define crude oil: a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights, and other organic compounds, petroleum. Gasoline: a volatile flammable mixture of hydrocarbons derived from petroleum; used mainly as a fuel in internal-combustion engines.

The relationship between retail gasoline price and crude oil prices is considered to be asymmetric meaning that gasoline prices responds more quickly when crude oil prices rises than when they fall. Basically it is supply versus demand, when supply is high and demand is low the price drop but when supply is low and demand is high price rise. This is noticeable at gas stations during holidays when consumers are expected to travel more than any other time of the year. We must also remember that gasoline and crude oil are commodities and as such are affected by several things. Supply is affected by factors such as inventory levels, political issues, war or refinery or shipment problems. Demand is affected by weather, seasons, driving habits and economic growth.

The asymmetric relationship also includes market power, search costs, consumer response to changing prices, inventory management, accounting practices...