Chapter 08

Case Study 2 on Page 176-7 discusses the temporary monopoly achieved by Tamiflu as an antidote to a potential outbreak of bird flu. The following report updates the case study with information about plans to enlarge UK stocks of Tamiflu.
The Times, Saturday, April 21, 2007
www.timesonline.co.uk/tol/news/uk/health/article1685400.ece

The following two articles link to our coverage of cartels in Chapter 8 and the potentially cooperative behaviour of oligopolies in Chapter 9.
Financial Times, Tuesday, August 2, 2007
www.ft.com/cms/s/80a2dcf2-4094-11dc-9d0c-0000779fd2ac.html
Financial Times, Tuesday, August 2, 2007
www.ft.com/cms/s/0/86770a1c-40a4-11dc-9d0c-0000779fd2ac.html

The following stories have links with Chapters 3 and 10 as this is essentially a story about demand and supply, however, there are also links to the story of OPEC and the high price of oil (Case Study 1 in Chapter 8 on page 173-6), to the principle of substitution in Chapter 6 as this is about finding a substitute for high priced oil. They are also related to the issue of long term growth and global warming Chapter 26 page 603-4 as biofuels may not reduce carbon emissions but they are a renewable resource.
The background to the surge in interest in biofuels is two important trends: First, the high price of oil and the problems that burning fossil fuels cause for the environment; second the fact that oil is an exhaustible resource which will eventually run out and so we need to find energy sources which are renewable in the long term. The current round of reports generally relate to the fact that high oil prices have created an incentive to seek substitutes and one possible substitute is ethanol which can be extracted from various crops, including corn and wheat. The greater demand for these crops has then lead to their prices rising and this has both raised the cost of the food products that use these as inputs directly and it has raised the prices of animal feeds which has put upward pressure on meat prices. Higher food prices have had particular effects on poor people in countries such as Mexico and China.
Financial Times, Friday, February 23, 2007
www.ft.com/cms/s/997406be-c29c-11db-9e1c-000b5df10621.html
The Times, Friday, March 2, 2007
business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1459141.ece
Financial Times, Tuesday, March 27, 2007
search.ft.com/ftArticle?queryText=Changing+landscape%3A+why+worries+surround+rural+America%27s+biofuels+surge&y=3&aje=true&x=6&id=070327000564
Financial Times, Tuesday, May 1, 2007
search.ft.com/ftArticle?queryText=Tyson+says+rising+corn+costs+to+hit+meat+prices&y=5&aje=true&x=16&id=070501000505
The Times, Tuesday, June 12, 2007
www.timesonline.co.uk/tol/news/world/asia/china/article1917927.ece
Financial Times, Friday, June 29, 2007
www.ft.com/cms/s/52365a5a-25dd-11dc-b338-000b5df10621.html

The following indicates an attempt at a strategic reaction from the oil producers' cartel OPEC (Chapter 8 for OPEC, and also relevant is the discussion of strategic interaction in Chapter 9 under "Oligopoly") who clearly felt threatened by the wave of interest in finding substitutes for oil. The report implies that OPEC would not invest if they thought their market was threatened and this would drive oil prices even higher. However, the paradox is that even higher oil prices would create an even bigger incentive to seek substitutes, so it is not clear that this is a very sensible line for OPEC to push.
Financial Times, Wednesday, June 6, 2007
search.ft.com/ftArticle?queryText=Drive+on+biofuels+risks+oil+price+surge&y=5&aje=true&x=9&id=070606000835

Case study 1 on pages 173-176 is about OPEC and oil prices. The following gives an update on oil prices:
Financial Times, 4 December 2007
search.ft.com/ftArticle?queryText=Upward+momentum+in+oil+prices+set+to+continue+in+2008&y=5&aje=false&x=14&id=071204000062&ct=0

A related story is about electricity and gas prices which have also been high, and clearly connected to oil prices:
Financial Times, 17 December 2007
search.ft.com/ftArticle?queryText=Business+users+warned+of+fuel+cost+problems&y=8&aje=false&x=7&id=071217000155&ct=0

A big story in 2008 has been the high price of energy and this links to the case study of OPEC in Chapter 8 (as well as to demand and supply stories in Chapters 3 and 4) and input markets in Chapter 10. The following relates directly to the impact of OPEC production decisions on the price of crude.
Financial Times, Wednesday, August 6, 2008
www.ft.com/cms/s/0/d58ad88c-634d-11dd-9fd0-0000779fd2ac.html
Financial Times, Wednesday, August 13, 2008
www.ft.com/cms/s/0/21f4e0c4-68cf-11dd-a4e5-0000779fd18c.html

And the following suggests that the high price of oil may prolong the productive life of the North Sea oil fields:
Financial Times, Saturday, July 12, 2008:
www.ft.com/cms/s/0/2a2ad4a8-4fb4-11dd-b050-000077b07658.html

The following stories give an update on the Tamiflu story on page 176:
The Times, November 23, 2007
www.timesonline.co.uk/tol/news/uk/article2924970.ece
AFP, May 10, 2008
http://afp.google.com/article/ALeqM5h9wEldxqioE9_pb87cylklOD6NIw

Print this page

Oxford University Press, Online Resource Centre, Chapter 08.

Chapter 08