Motor oil

As we can see, gasoline demand continues to rise each day despite the fact of high priced motor gasoline. Goldman Sachs in its Energy Weekly report stated that gasoline demand growth continues to be driven by year over year price changes which average to a modest 5% change during 4 weeks. We can observe that crude oil prices are reaching a 9 month high of $71.00/bbl. US crude inventories built 2 billion barrels due to the strong response of the refining system to the extraordinary high cracks due to the increase in demands for oil reaching 10.9 million b/d. We can suspect that the crude oil inventories are decreasing due to the high market demand from consumers. Also providing the fact that some drivers aren’t driving efficiently because in the cities, frequent stopping and starting will decrease the efficiency of gas, also driving at a moderate speed of 55 mph will help save gas. Furthermore, getting vehicles such as Jeeps, SUV’s aren’t that economically fuel efficient; therefore, causing them to spend more oil and increasing the demand for oil.

Relation to Chapter 6

We can really relate this to chapter 6 aggregate demand for goods and services. The demand for oil is continually rising due to the fact that it is an inelastic good. Consumers are usually ordinary citizens and they get their income from their workplace each month and minus tax, they will have their disposable income. However, that disposable income, there would be some that goes to paying for mortgages, loans, food, and most of all, gasoline for the car. This continue rising of the prices might also lead people into investing more into the oil industry because they expect the future prices to go up; therefore, making profit off of it. Then we can look at the psychological factor where people start to purchase cars that are fuel efficient and can save a bit of money from each month’s gasoline expense. So, gasoline prices are affecting our daily lives, and as well as increasing the GDP of the country due to high consumption. However, if the oil prices are going to continue to rise, when will it drop?

Economics Chapter 7 Blog

<<http://www.bloomberg.com/apps/news?pid=20601082&sid=aTbBweZdM51M&refer=canada>>

On May 29, the bank of Canada indicated that they would be raising the interest rates in the future due to the over inflation in the economy. The interest rate for an overnight loan would be 4.25%. The Canadian dollar are at its 30 years highest, the central bank said in a statement today in Ottawa, “There is an increased risk that future inflation will persist above the 2 per cent inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target.”. The over inflation of Canadian dollar and the lack of U.S. demands caused workers at manufactures such as the building materials and car industry unemployed. We can see that 1 Canadian dollar can be exchanged for 93.2 cents from May 28 of 92.59 cents. We can see that the Canadian dollars are increasing by a lot, but a senior fixed income strategist at TD securities stated that, “The market is quite comfortable to see the Canadian dollar higher yet. The way they have changed their tone, we firmly think that the best move right now is July rate hike.” However, despite that inflation is pretty high already, 6 out of the 20 surveyed economist predict that it will continue to rise this year, due to the evidence of exporter’s sales are still continuing to grow. Due to the high Canadian dollars, our exports are becoming less attractive to foreign customers and US exports make up a third of Canada’s 1.1 trillion economy. Some industries start to complain about the lack of swift decision made by the government and demand the government to minimize their losses.

Relation to chapter 7

We can see that in chapter 7, we study about how to control money using different methods and one of them was controlling the interest rate through the central bank in order to guide the economy to healthy 2%-2.5% inflation. In the article above, it clearly states that due to the over inflation in the Canadian economy causing our dollars to rise rapidly almost matching the U.S. currency of 1 to 1 ratio. The central bank decided to increase interest rates in order for people to save more, and take money out of the circulation in the economy. A high currency doesn’t necessarily means that it is bad for the economy, because when your currency is high, you can exchange more for other currencies; therefore, you can buy more of the same thing with the same amount of money then before. This means that the imports would increase and more people would buy imported goods since they are cheaper. However, with a high currency, we can see that the export economy would be affected, because when foreign investors or customers want to buy things from you, they have to pay more in order to pay for the same amount of product, affecting them to buy less or maybe not even buy at all. Therefore, we need to find an effective way to keep our inflation from 2%-2.5% and find a equilibrium between export and imports or whatever is best for our economy.

BC economy expected to expand by healthy 3.2% in 2007

<http://www.canada.com/vancouversun/news/story.html?id=d5784f75-410c-46f8-95dd-d45a1a6e313f&k=89403>

The BC economy is expected to have growth of 3.2% over the next year despite the impact of the slow growing US economy. A survey conducted by Metropolitan Outlook observed that Vancouver remained the country’s third fastest growing city while Abbotsford dropped to the 5^th and Victoria dropped to the 20^th. This year Vancouver’s economy is supported by construction sector and solid employment gains that will boost consumer spending; overall boosting the city’s economy by 3.1%. In Abbotsford a strong domestic demand will affect the city’s growth by 3.0%, but a slowdown in key services will cause to a slow down in the economy’s growth in Victoria to 2.1%. Calgary and Edmonton will have slowed half of their growth rate in this year compared to year 2006. Announced by the Canadian Chamber of Commerce, the real GDP growth is 2.8% in 2006 and will slow to a 2.4% due to the lowered US demand for Canadian exports. Therefore, Quebec and Ontario has to bear the burden of having a slowed economy due to lowered US demand, but Calgary and Edmonton wouldn’t be affected as much because of their high prices for energy and other commodities.

Relationship to Chapter 5

In Chapter 5, we studied about GDP and learned that GDP can roughly express a country’s level of business activity. From the article above, we can see that BC’s economy has an average growth of 3.2%. Furthermore, the article described each of the main cities’ in British Columbia about their economic growth along with a reason saying why. In Vancouver, our economic growth this year is 3.1%, which is a pretty good growth rate due to the support from construction sector and the solid employment. This is affected by the building of Olympic structures needed in 2010 and created many job opportunities. In Calgary and Edmonton their economic growth is always in an increasing rate because they have natural resources such as oil, which is very important to now a day society. This source of income mainly increased the GDP in those cities by each year. Achieving a 3.2% growth in GDP is a pretty healthy situation. However, if BC legalizes marijuana, they can increase their GDP probably by another 3 to 4% from study conducted by Cannabis BC. Nevertheless, 3.2% is a healthy number for the growth of economy and for Vancouver; next year would most likely increase due to more job opportunities from the effects of 2010 Winter Olympics.

Chapter 4 Blog

BC’s grand budget plans have financial teeth, says Finance Minister

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The Finance Minister, Carole Taylor, propose that BC has the cash and willpower to cut taxes, clean up the environment and ease the housing-cost burden felt by the province. The Government has plans to cut down on greenhouse emission gas by one third by 2020. Even though we don’t know how much this plan would cost the government. However, we know that the government is planning to use $2 billion for housing initiatives, 10% personal income tax cut, and 20% increase in welfare rates. There were government budgets that include plans for helping children, families, and seniors. Carole Taylor says that the government decided what was best for the citizens of BC is a tax cut to reduce their burden and stress from the high priced housing. One of the main reasons of the tax cut was due to the price jump of 24% across the province. The government currently is trying to find a policy for the benefits of every BC citizens. For the 10% tax cut, it applies to citizens that earn up to $108,000 per year. Carole Taylor also said that she couldn’t guarantee that there will be another tax cut in the year 2009. BC competition Council recommends that the government should give a tax cut for people that earn up to $150,000 but the government has to think about it due to the major decrease in revenue that this action will cause. A public policy expert says this is how modern governments are surviving in the new age of surplus budgets. BC government had projected a $400 million surplus t his year and over the year of 2006 – 2007, a $2.8 billion surplus is expected. The government’s goal is to putting more money into housing and continuing with their environmental dreams. Carole Taylor mentioned once again that their financial plans are based on reality because it is based on solid data. The government also said they are open for any criticism.

Relations to Chapter 4 “Taxation”

Taxation is something that none of us can evade. A country’s revenue is mainly from taxes. When the government decreases the tax rate, it means that they will lose a lot of revenue and the province might be in the risk of going into debt. When the government propose that they will cut 10% personal income tax for people who annually earn less than $108,000. When we look at the census for the year 2002, the average income of a person in Vancouver would earn $44,897. From that, we see that most people in Vancouver don’t earn over $108,000. This tax cut will relief the burden on most of the people in Vancouver, but the taxes collected in Vancouver would also drop. Now imagine what this tax reduction for everyone in BC. In the year 2002 from the statistic, it shows that an average income for a person is $43,096 and the total income is 86 million dollar. The total tax paid for all those incomes was 17.3%, while 12.2% went to Federal and the other 5.1% went to provincial, which means a total of $14.62 billion of taxes that is collected, while $10.492 billion went to Federal and $4.386 billion went to provincial. With that money collected from us tax payers; BC also has to use the money to pay off their debt and also fund health care, education, social programs, and many other things. With their newest financial plans, they are having the means of decreasing tax, while increasing spending. This is economically unwise because when they increase spending, they actually need more money; instead they decrease tax, which means they will obtain less money. Some of the solutions that the government can do and also please the citizen are to keep the tax rate at what it is right now, but increase another tax to balance out their income.

Chapter 3 Blog

“City Firms caught in FBI gaming inquiry” January 21, 2007

Over 16 investment banks, law and accountancy firms have been contacted by the US department of Justice for evidence connected with online gaming industry. These actions was all caused by the US president George Bush is passing a law that outlawed internet gaming in the US, which was viewed by other people as protecting United States’ best of interest. US have been contacting and getting any information they can get their hands on even extending their jurisdiction to UK. United States’ DOJ is trying to build a case against people who benefited from the industry and especially the ones who founded the online betting companies. Most banks are opened to cooperation with this worldwide operation on internet gambling. Following this operation, David Carruthers, the former chief executive of BetsonSports was arrested and Peter Dicks, the chairman of SportingBet, as well. This whole operation was motivated by the investment boom in the online gaming industry after companies in UK, when a lot of the individuals had benefited while the uncertainty over the legality of online gambling. NETeller is a payment processor for gaming industry and was arrested and charged for laundering billions of dollar and tax evasion. There would obviously be more actions following in the future, and would make the business for online gambling industry harder to operate in the US.

Relation to Chapter 3 – The Roles of Government

In chapter 3, we learnt about market imperfections, third party effects, unmet public goods, and distribution of income. A reason in why this problem happened was because of the lack of information. When individuals didn’t know about the legality of online gambling, the government took place and regulated on the gambling industry. They are finding all sorts of evidence that connected with the online gambling industry. Companies such as HSBC, JP Morgan, Credit Suisse, and Dresndner Kleinwort are issued with official requests for information. This also has a third party effect on United States’ economy. When everyone goes online gambling and real money is involved, during the uncertainty over the legality of online gambling, they didn’t have to pay any taxes for the money they won online. So many made a fortune from these websites and online gambling companies, because of the taxes that weren’t necessary to be paid to the government of US, they receive fewer income from the taxes revenue. This has a negative third party effect on the government itself because they can get more revenue and money from the taxes generated by gambling. Gambling is a really big industry and can usually help generate billions and billions of revenue. Those revenue can be used on other services such as military equipment or invest back into the economy in a certain way that helps the American citizens. Even though after this operation, the US might lose a lot businesses in the online gambling industry, but at least they will be able to receive billions of tax revenue that can be spent back into the economy for better use.

Chapter 2 Blog

“Oil prices slide a day after climbing on talk of further OPEC cut, Nigeria unrest“, The Canadian Press, Nov 7, 2006

As oil prices is slowly decreasing only after the increase of oil pricing due to intense situation happening in Nigeria. In Nigeria, threats of violence made by the armed protestors, there were oil workers who was kidnapped or held hostage in the southern oil region of Nigeria. An American and Briton was also kidnapped and released by the militants because they were employed by a Norwegian firm working with Chevron Corporation in mapping petroleum deposits. All these events have caused Nigeria’s oil production of 2.5 million barrels per day down to 1.875 million barrels a day. Militants continually invaded different oiling stations and forcing the workers to shut it down. Even though with the oiling stations being shut down by the militants, OPEC themselves also plans to decrease oil supplies by 1.2 million barrels per day. As said by the president of OPEC Edmund Daukoru, who is also Nigeria’s oil minister, “oil cartel may need to further cut its output, but that it doesn’t have a specific price floor or band that it wants to defend”. Daukoru also commented on the supplies of oil barrels each day, “The Market is clearly oversupplied.” On November 1, OPEC has decided to cut the production of oil supplies; however, we yet have to see what effect it will do to the market.

Relations to chapter 2 – “The Operation of a Market”

This article relates closely to chapter 2 where we talk about mainly supply and demands. As the prices of oil change dramatically over months from a peak height of $78 a barrel in the summer time to about $57 to $61 a barrel over the past month, it was affected by many different factors. During the peak times, many people choose to go out and usually they use a car; therefore, leading an increase of gasoline usage and the number of buyers causes the demand to go up. For gasoline, there isn’t really a substitute product for it; except for some cars that uses diesel or hybrid cars. For supply, the price increased due to the situation in Nigeria because of less quantity supplied, the price will rise. As the president of OPEC say that market is clearly oversupplied, by decreasing the supply, the price would raise hoping that it will reach the price they’re hoping for.

Chapter 1 Blog

"Go west...to get rich", Toronto Stars, October 31, 2006

this articles refers to advice of getting rich or at least a bigger pay raise. During the past years, in the Western parts of Canada, economic growth for provinces was recorded. According to a survey conducted by the Conference Board of Canada, workers in the western provinces, especially Alberta will receive the biggest pay raise in 2007. Furthermore, the shortage of workers in Alberta for the oil and gas industries has further pushed the pay raise for the talented workers. Most of the workers will be expecting a pay raise, with the oil and gas sector expecting a 6% increase and with the telecommunications and the communication expecting the least with a 3.2 and 3.0% increase. Some companies differ from a pay raise of 1 - 30% pay raise to keep talented workers in the company. Even though this might be hard on some companies, but it’s worth it.

Relation to Chapter 1 - Introductory Concepts

This relates closely to what we had learnt in chapter 1. As the gas and oil sector receive a better pay raise, it is because they don’t have enough workers working for them. As there are less and less skilled workers, the demand and the price companies are willing to pay for a worker is increasing. As we can say, skilled workers in the gas and oil sector are scarce. So it would be worth it if someone wants to plan on working in the gas and oil sector. We can also use opportunity costs to calculate that is it worth planning a future career in the oil and gas sector. One of thing major things that Canada is missing right now is the need of skilled workers. The trades is being more attractive with its high pay; therefore attracting more skills people. This will definitely have a positive effect on the market. With more skilled workers, there would be more people employed and less competition for other business sectors. This would help reduce the amount of people that are unemployed and improve the living standards for people around the country; therefore, leading a better economy throughout Canada where everybody is benefitted.