MARATHON OIL

Marathon Oil

Marathon Oil

Introduction

This assignment discusses the production and operation management of the oil company “Marathon”. One of the aspects of this assignment is to analyze how the physical environment can pose a challenge to businesses. Marathon Oil is an oil and natural gas exploration and production company. Its principal exploration and development strategies occur in the Norway, United States, Canada, United Kingdom, Angola, Gabon and Equatorial Guinea.

Additionally, the company operates other business activities that transport and market crude oil, natural gas and products that are manufactured from natural gas (liquefied methanol and natural gas).

Possible option to reduce the time involved in the production process

One possible option that can be taken to speed up the production process is to accelerate the transport of oil through the pipeline. Generally, pipelines are the most economical way to transport large quantities of natural gas or refined oil products over land. They have higher capacity and lower cost per unit as compared to shipping by railroad. These pipelines can also be built under the sea but that process is technically and economically demanding; therefore, oil at sea is carried by tanker ships (Droz, 2004).

Oil pipelines are made from plastic tubes or steel having inner diameter from 100 to 1200 millimeters. These pipelines are typically buried at a depth of about 0.91 to 1.8 meter. Pump stations along the pipeline keep the oil in motion and the flow speed is about 1 to 6 meters per second. To transport two or more different products in sequence in the same pipelines, multi-product pipelines are used. Usually there is no physical separation between different products. An interface is produced when mixing of adjacent product occurs. This interface is usually absorbed at the receiving facilities on a pre -calculated absorption rate.

The relationship between the retail price of gasoline and the price of crude oil

When you see the prices of oil at the gas stations you might wonder why the gas prices rise so quickly but fall so slowly. This happens because when you see the price of a barrel Crude Oil selling at $45, that barrel will not reach the gas stations for as long as 2 to 6 months. The reason for this phenomenon of gasoline prices rising quickly but falling so gradually is actually the competition prevailing in the market place. When the price of crude oil rises, all the gas stations increase their prices because they have no choice; otherwise they will lose money on each sale. More or less the same prices are being paid for refined gas by all gas stations and they relative keep a small markup on the fuel they sell.

But when the price of crude oil decreases, what forces the gasoline prices to decline is simply competition. One gas station lowers the price by a few cents to attract more customers. This enforces the competitors to do the same until the prices gradually comes down to the earlier price (assuming the price of crude oil returned to its prior ...