Our raw materials, which have a very important place among our costs, are directly affected by oil, so the question of what is affected by oil, is a very serious question and knowing the reasons can make a significant contribution to our business.

Let's get to know the oil industry first. We can briefly describe this industry with three legs.

1 - Oil Search, Extraction
2 - processing, storage and transportation of petroleum,
3 - oil refining and marketing for the purpose of presenting to the consumer.

Well-known companies Exxon, BP, Shell, etc. these are integrated companies that carry out all three activities. The most profitable part of this business search/extraction phase, although it is the most risky part. You cannot expect any costly search to result in finding oil.

Oil is a Latin word derived from petroleum, which means petra (stone), Oleum (oil), which means stone oil. As we know from the middle school years, oil has been formed by the transformation of fossil animals and trees that died millions of years ago into hydrocarbons by heat and pressure under the soil. Oil is usually trapped in the rocks under the ground. It is easy to bring the traditional oil in this form on top of the Earth. It is possible to remove this oil close to the surface with Wells similar to arzezyan Wells. There are currently 1.3 trillion barrels of conventional oil reserves in the world. The first oil well in the world was opened in America in the mid-1800s. Other than that, there are other types of oil that are very difficult to remove and economically costly. But since there are special techniques outside the oil well to remove them, they cannot be used without traditional oil running out(hence oil prices rising too much).

Today, it is estimated that all the traditional oil resources on earth can be easily extracted.

There are a few areas in which the oil is used very rarely as it first exits, but it should be refined for all its applications. Refineries decompose oil, and these parsed parts are converted into products such as diesel, gasoline, jet fuel.

All raw oil is not one. It is possible to classify crude oil over two criteria.

Sulfur is found in the oil as it comes out of the soil. Less sulfur is easier to refine and cheaper. Because sulfur tastes negative, this feature of the oil is defined as sweet or minus Petroleum.

Another distinctive feature of oil is its intensity. The less the density of an oil, the cheaper it is refined, and the more energy it is. This density property of oil is defined as “light oil” and “heavy oil”.

Therefore, the most expensive and acceptable oil is "sweet, light oil". The best example is WTI ( Western Texas middle class) oil, which we often see in crude oil pricing.  The example of” minus, hard oil “is the” heavy Arab oil " of Saudi Arabia.

Let's go back to the question we asked in the first place after all this general information, and how does it affect the price of oil?

The most basic answer to the question is the supply - demand balance. Now, let's open up this balance.

FACTORS AFFECTING DEMAND:

Oil is blood in the veins of the world economy. Every change in the GNP directly adds oil demand. (see Chart 1). In other words, GNP increases always bring about oil increases. Conversely, it brings down as we see in the economic crisis. Another dimension of this relationship might come to our mind. Let'S say that gsmh is improving very well, in this case oil prices will increase. However, a very high oil price will prevent the increase of the GNP and then reduce its demand. Recent press reports, alternative energy sources, etc. before a long time, oil will not change the relationship between the GNP. We can use the statistics of the states to track the demand for oil to reflect the business. The Ministry of energy and the Ministry of energy agencies of many countries publish data on this subject. ( you can access resources in Google with a short search.)

If we look at the world's top ten oil consumer list (list 1) to examine the sources of demand in a little more detail. We see that America is clearly ahead of it. Again, if we examine the world's top ten oil importers List(List 2), although America produces its own oil, it is also the head of the list in import.

As countries develop, they move from the production economy to the service economy. Developing countries, such as China, which have a production economy, increase oil demand. In developed countries, the service sector is dominated and oil consumption is stable. But developing countries increase oil consumption.

The areas and percentages of oil are as follows.

1 - transportation (69%))

2-industry (24%))

3 - Housing (4%))

4 - Electricity Generation (2%))

5-commercial (%1))

FACTORS AFFECTING SUPPLY

1 - world oil production

2 - Crude Oil Reserves

3-spare capacities

4-Crude Oil Stocks

5 - Geopolitics

Let's briefly elaborate on these elements.

World oil production: world oil production grew by 1.5% annually on average to meet demand. (I exclude the last crisis.(see). While world oil production is the story, we need to talk about two big groups that are holding the world oil production alongside the other. OPEC and non-OPEC groups.

OPEC ( organization of oil exporting countries) is an organization established in 1960 to be a strong voice for the oil industry. Saudi Arabia, Iran, Iraq, Kuwait, Qatar, Libya, Nigeria, Algeria, Ecuador, Indonesia, the United Arab Emirates, Venezuela and Angola. Ordinary meetings are held twice a year at Vienna's centres and the supply-demand balance is reviewed at these meetings. In general, they put quotas on member states for the purpose of increasing or balancing oil prices.

In response to the support of Western states to Israel during the war that ended with Israel's occupation of Jerusalem in 1973, OPEC declared its name by imposing an oil embargo and creating an oil crisis.

In the meantime, a very unknown issue is that OPEC holds only 35% of the world's oil production. The other part is covered by non-OPEC countries. (Table 1))

When we examine the world's top ten oil producers, we are faced with the dominance of Saudi Arabia and Russia. ( Table 2 ). But the point is that Saudi Arabia has an incredible reserve, and it only uses a small one. Saudi Arabia, the brother of OPEC, manages to keep its oil prices high. (Table 2 ). The Canadian oil listed in this list may be misleading as it is a non-economic oil tour.

Spare Capacities. While there is a possibility of extracting more oil in the existing wells, we call the spare capacity to the amount that is not removed in order to keep the price high. Most of the spare capacity is naturally in OPEC countries. Because these countries restrict their capacity with quotas to keep the price high. In non-OPEC countries, there is no spare capacity. Because these countries are running the facilities in the last capacity to improve their economies.

Crude oil stocks: oil is stored in various areas. Manufacturers, ships, users, etc. Increasing stocks in the world means that prices will fall. Otherwise it shows that it will increase.

The geopolitical situation: the geopolitical situation on supply and demand the price of oil are effective. The OPEC oil embargo in 1973, the Iraq war in 1990,the pirate and workers ‘attacks on the oil pipeline in Nigeria in 2007, and the nationalization of oil reserves in Venezuela in 2007 are good examples. Geopolitical events are very difficult to predict, but they are very effective in oil prices.

When we look at the production stages of our plastic raw material, it is possible to see a very clear presentation. The more you go to the main source, the more profitability increases.

So The Extraction Of Oil - Refined - Intermediate Materials - Monomers-Polymers

As a result ,

The highest profitability is the oil-makers. Demand and OPEC (supply OPEC affects oil prices.(see). determines. The demand is determined by the GNP. Polymer producers that make up the ring before us are actually monomer, and even if they do not have the basic composition production, they can not make high profits. The plastic sector is the peak seen in our opinion, the place in oil consumption is very small. He's more of an oil user. So it's mostly affected, but it can be affected at a small rate. Oil prices are also related to demand, so the world economy, but especially the American economy is the basic data we need to follow. 

Yavuz EROGLU

SEM Plastik-general manager