Select a commodity that you believe might be chosen for a strategic commodity an

Question

Select a commodity that you believe might be chosen for a strategic commodity analysis in the industries listed below. Describe the factors impacting each commodity, using a Porter Five Force analysis (described earlier in this chapter). Justify why you believe the commodity is strategic to that industry, and the approach to be used in developing a commodity strategy.

Oil (West Texas intermediate) versus gasoline (discuss differential)

Metal

Chemicals

Plastic resins

Shipping

Wood products and other production materials

Aeronautical equipment

Machine Tools

Telecommunications

Explanation / Answer

Ans: Energy Information Administration (EIA) analysis of the petroleum market points to the price of crude oil as the main contributor to the large changes in gasoline prices the U.S. has experienced in recent years. Gasoline and oil prices are often topics in EIA. Crude oil prices are greatly affected by levels of supply relative to actual and expected demand for the petroleum products made from crude oil.
Strong world-wide demand growth for petroleum in the mid-2000s was a major reason for the record high prices for crude oil and gasoline in mid-2008. Then the on-set of the U.S. and world economic recession in 2008 led to a sharp drop in demand and prices. The gradual improvement in the U.S. and world economies starting in 2010 and the political events in the Middle East and North Africa in 2011 contributed to the gradual increase and spikes in crude oil and gasoline prices in 2011. Hurricanes in the Gulf of Mexico and floods in the Midwest that shut down U.S. crude oil production and negatively affected refinery and pipeline operations also caused price spikes several times during the mid and late 2000s.
Crude oil and gasoline prices fluctuated but declined overall from May to December 2011 as supply issues eased and petroleum demand followed fluctuations in the pace of recovery from the world and U.S. economic recession. The seasonal switch from summer gasoline blends to lower cost winter blends along with reduced gasoline demand also contributed to the general decline in prices in October to December 2011.
Oil prices have fluctuated widely during 2012, reflecting concerns and expectations for world oil supply, economic conditions, and petroleum demand. Prices climbed from January to March, as turmoil in South Sudan, Yemen, and Syria caused a tightening of world oil supply. Prices then declined through June, as supply conditions eased on increases in OPEC and U.S. oil production, and from lower expectations for petroleum demand in the U.S. and Europe. Prices began to rise again due to seasonal increases in petroleum demand, and from expectations of economic stimulus measures in China, Europe, the U.S. and concerns about oil supply disruptions in the Persian Gulf.

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