“Life in the palm of your hands”; the common expression that comes with our lives today. Yes, I am talking about phones. Smartphones have changed the way we live our lives each day in a way that many think is for the better. With that, smartphones have transformed the way businesses and consumers interact with one another through digital and strategic methods to make their lives easier. The airline, sport, and hospitality industries have taken notice of this change in consumer behavior and have revolutionized the idea of digital ticketing.

Mobile ticketing conveniently provides customers with ticket options by utilizing the power of their smartphone. In my opinion, easy, quick, and convenient are all values that consumers take into account when having the option of using their smartphones over hard copies. Let’s begin with the actual convenience of having a mobile ticket on one’s phone. As technology progresses and mobile devices become “smarter”, this feature is going to take over the consumer dynamic. As per a study done by Juniper Research, “Mobile tickets are expected to account for more than one in two (>50%) ticket transactions on digital platforms by 2019”.

One of the major advantages of having a ticket on your phone is that it cuts costs for ticket providers as well as the customers. No shipping, no paper, no ink; these factors alone make mobile ticket more appealing than the traditional style. Airlines have increasingly promoted the use of mobile tickets through their mobile apps. American Airlines, JetBlue, and Southwest list the step-by-step instructions on how to download and access boarding passes from your smartphone. Apple, Inc. has made the downloading process simpler through an application called “Passbook”, which has now been simplified into “Wallet” (See right). Apple has formed partnerships with airlines, sports teams and credit card companies to create an all-in-one format for their clients in a development towards eliminating wallets. Additionally, industries of all kinds are adopting these mobile ticketing features as a way to increase customer experience in a variety of aspects.

Who is using the technology?

Sports stadiums and arenas have understood the niche when it comes to mobile ticketing and are constantly looking to find ways to enhance the consumer experience. According to the Ticketing Technology Forum, “with stadium owners looking to increasingly [utilize] the latest technology to improve their grounds and enhance the user experience, mobile ticketing looks set to take off”. Owners around the National Football League see availability within their stadiums that can increase the overall fan experience, surpassing just the mobile ticket. Also mentioned in the article, “No longer will the mobile [phone] just be another object in your pocket, it will now be a gateway device to stadium garages, the grounds, food and drink services, a security pass and an interactive device throughout the day”. There are endless possibilities for this technology and business leaders hope to acquire a rewarding service just like the airline industry does with its rewarding miles programs.

Inevitably, there is a promising future for the mobile ticket, and stadiums hope to use e-tickets as the entry point to many possibilities as previously mentioned. Making purchases within the stadium, finding seats more clearly by using an interactive map, ordering food directly to the seats so that fans will not miss any action, and locating the nearest toilets are all part of the expansion plans that have been spoken about.

Mobile ticketing goes much further than just being able to print your ticket and increase user experience. Through the capabilities of mobile ticketing, consumers amongst all industries are able to look at prices on a recurring basis and purchase a ticket up until the beginning of the event or trip. Pricing plays a tremendous role in ticket purchases, especially now that consumers can see these price changes instantly, all with a touch of a button. This technology enables customers to locate the best seats at the best value of any event they wish to attend.

The impacts of pricing strategies are detrimental. To start, there are two types of strategies: variable pricing and dynamic pricing.

Variable Pricing

Defined by the Houston Chronicle, variable pricing as a pricing strategy where a business offers varying price points at different locations or points-of-sale. For instance, let’s consider sports. This whole dynamic is based upon the price of tickets set in advance of the season, but understanding that prices can change depending on the game. The value and match up of the game impacts the pricing of the ticket.

The graphic above shows the ticket prices for the 2017 Los Angeles Rams’ home schedule. Putting the variable pricing strategy into action, the average cost to see the Rams play the Seattle Seahawks will cost you a lot more than when Miami Dolphins come to town. The ownership of the Rams anticipates that there will be much higher demand for a divisional matchup than an out-of-conference one.

Airline and hotel industries also play a role in using variable pricing methods. Airlines set their “Economy Plus” or “Economy Comfort” and standard economy seats at different prices due to the level of comfortability and on-board experience in the cabin. Consumers will additionally see a change in price based on the final destination city. As another example example, there will be a large difference in hotel price between booking in New York and Illinois. A post on Travelandleisure.com states a night in New York City will go for $244 on average as compared to $199 in Chicago.

Dynamic Pricing

On the other hand, is the concept of dynamic pricing. When it comes to this pricing strategy, there becomes a notion set as to the price of items determined by a customer’s perceived ability to pay. Again, let’s use sports to create a better understanding. If the forecast is projecting rain for next Sunday at an outdoor stadium, less fans will be expected to show up; therefore, teams must lower prices to draw a larger crowd for support. Rutgers’ NCAA Football Senior Associate Athletic Director and Chief Marketing Officer, Geoff Brown went into further explanation about his team and how the organization uses dynamic pricing. Mr. Brown states, “there’s a need to maximize ticket revenue and at the same time not penalize longtime, true Rutgers fans”. Schools that have college football teams adjust single-game prices upward or downward based on the marketing conditions of fan demand and ticket scarcity.

Aside from college football, consumers are aware that airlines also use this pricing strategy and have made note that they may be spending more when it comes to flying back home during the holidays. The graph below shows the change in prices of airline tickets as the date becomes closer to December 25^th. According to the graph, it is recommended to book flights 90 days, or three months, before Christmas rather than dealing with a 27% increase of the original price ten days out (See left). Customers should understand this pricing inflation and make the necessary arrangements.

This idea also comes into play when booking a hotel in Houston during the Superbowl. Because of a national event like Super Bowl LI, consumers will have no choice but to agree to paying a higher price for their stay. The public is able to see all of the price changes, by exploring dates and locations through the power of their mobile devices. Mobile ticketing has allowed consumers to compare rates, track pricing changes, and locate the best deals available. The mobile ticketing platform operates through the use of dynamic pricing strategies. At any moment, applications like Google Flights can survey demand and change the prices of tickets accordingly by monitoring your search history.

Having the ability to track your favorite sports teams, or see if you will

be able to stay at your dream hotel all goes back to pricing and the power of technology. These pricing strategies impact the way customers interact on a mobile platform. Believe it or not, mobile device
s are transforming the way consumers travel. According to eMarketer, customer purchases on a desktop have continued to decline. In 2017, 59.2% of airline travelers are projected to book their travel itineraries through their small screens (see chart below).

Though technology is great in many aspects, it is crucial to look at the other end of the spectrum and discuss the downsides of the growing world of mobile advancement. Smartphones do not have unlimited battery. Questions arise as to “What happens if my phone runs out of battery?” and “Will my ticket still be retrievable?” This is major concern for users as they are hesitant to rely solely on mobile technology. While security and boarding lines are intended to decrease through the use of mobile boarding, the issue of pulling up your ticket and not being able to locate it becomes a problem that can hold up a line and infuriate others.

Fans Disagree with Mobile Ticketing

Jeff Gilbert, a San Francisco 49ers fan, expressed his concerns over abandoning physical tickets and introducing mobile ticketing. In the past, Mr. Gilbert could mail his friend one of his season tickets or exchange it in person. The only option now is to hope that Gilbert’s friend also has a smartphone and accept the ticket transfer. However, through the adoption of this new digital platform, the 49ers have implemented a 72-hour transfer process before the start of the game. This has resulted in widespread confusion amongst season ticket holders and has caused them to become fed up with the overall dynamic as per the article. This allows fans to print their tickets only when there are 72 hours or less before kickoff. The 72-hour window has proven to be an issue when fans want to donate their tickets to charity and other situations involving giving them away to random people.

Controlling Supply, Taking Advantage of Demand

In another case, the advancement of technology has caused an issue between supply and demand, leading to lives being lost. Industries across the board have unfortunately taken advantage of this concept. Martin Shkreli, an entrepreneur and pharmaceutical executive, acquired the manufacturing license for a pharmaceutical drug which allowed him to control the power of supply for society’s demand. Mr. Shkreli understood the need in the market and the people’s dependency on this drug in order to live. According to Dan Mangan’s article on CNBC, demand was extremely high and supply could not keep up with the market demand allowing Shkreli to have the authority to raise prices by 5,455%. A drug that once costed $13.50 at the time, soon became $750 per pill and consumers were forced to pay because they had no other options.

Technology Advancement and the Future

In retrospect, technology has taken our society to a whole new level. Its effects on supply and demand becomes more prevalent every day. While security and privacy issues arise from the growing use of mobile technology globally, consumers are able to look at mobile ticketing as a way to help understand the market and undergo an enhanced consumer experience.

The introduction of mobile ticketing has helped advance developing industries like hotels, airlines, and sports and their relevancy amongst the consumer demographics today. Through the innovation of technology, users will change the way they interact on a daily basis. We must sacrifice person-to-person contact in our transition toward a technological society. As a result, many people will lose jobs and payments will happen through fingerprint recognition. We have already seen this today through a variety of mobile applications, but really, we all know people are glued to their phones more and more each year. The advancements have both positive and negative effects on our lives, while it may not all be safe, consumers are drawn to the endless possibilities of technology, an industry controlled through the power of their mobile devices.

 

Sources:

http://www.cnbc.com/2016/06/03/martin-shkreli-hit-with-additional-charge-in-fraud-case.html

https://www.emarketer.com/Article/By-2016-Most-Digital-Travel-Bookers-Will-Use-Mobile-Devices/1013248

http://www.mercurynews.com/2016/01/15/super-bowl-ticket-prices-on-record-smashing-pace/

https://www.cleverism.com/complete-guide-dynamic-pricing/

http://www.strategicbusinessinsights.com/about/featured/2015/2015-03-variable-pricing-models.shtml#.WEnsV3eZMXp

http://www.ticketingtechnologyforum.com/mobile-ticketing-set-to-revolutionise-user-experience-at-sporting-fixtures/

https://www.juniperresearch.com/press/press-releases/1-in-5-mobile-wearable-ticketing-users-to-shift

http://smallbusiness.chron.com/definition-smoothing-variable-pricing-67031.html

http://www.travelandleisure.com/blogs/update-average-hotel-rates-across-the-us

Tuesday, November 8, 2016 was a significant day for the United States of America. Some man was elected president of our country, and the NFL passed its first post-election ratings test. This year, we have seen a nation where the National Football League and American politics have been intertwined like never before.

With Colin Kaepernick making his mark on national headlines each Monday morning due to his silent protests during the national anthem, the focus has shifted towards players protesting our newest President-elect. Many areas of the country seem to be unhappy with the results of the 2016 Presidential Election; however, people have decided to revert back to watching football on Sunday.

Week 10 marked the first set of games played after the election had been wrapped up. The overnight ratings were up after Sunday’s games. To put things into perspective, Game 5 of the 2016 World Series between the Cubs and the Indians amassed an overnight rating of 15.3 compared to 11.6 for the Sunday night matchup between the Cowboys and Saints. With the election over and baseball in the offseason, the Patriots versus the Seahawks drew a 14.3 rating, the best rating on S
unday Night Football since 2011. Of all the games this season, the afternoon game between the Cowboys and the Steelers drew a 17.8 rating setting the bar for the remainder of the season.
The NFL is all about ratings. As long as people are watching the games and stadiums are filling up, the NFL is making money. For example, it was announced earlier last week that the Patriots versus Jets game on November 27, 2016 has been flexed out of Sunday night and will be played during the late afternoon scheduling. The Kansas City Chiefs versus Denver Broncos game will be replacing the woeful Jets’ game with hopes of boosting ratings.

Although Week 10 looked great for viewers with a staple Seattle-New England matchup to finish the day, it is time to focus on what the following week will bring. If ratings continue to grow in this fashion, which is expected, you can assume these matchups will only get better. With playoffs around the corner, teams are fighting for their lives and the opportunity to hoist the Lombardi Trophy. This stiff competition drives fans to watch their favorite teams battle it out.

We still do not know the actual answer behind the spike in ratings for the most recent week of football, but we can assume that it had to do with the political debates and other championship games. Although the country is split between who they supported, people will look towards football Sunday as an escape and a way bring people of all races, genders, and ethnicities together under one roof. As a result, fans will continue to spend money and the NFL will continue to make money no matter who is President.

The Automobile Industry

The automobile industry today: an industry that is exhausted with a plethora of options for the consumer to choose from. This is a market that is innovative, changing, and advancing on a daily basis to meet increasing consumer and environmental needs.

General Motors (GM) is an American multinational corporation that designs, manufactures, markets and distributes motor vehicles and parts. GM was founded in 1908 and has played pivotal role in the automobile industry since its inauguration. With that being said, I am going to take a deeper dive into the mission and ideas behind Tesla Motors for the remainder of this post. Tesla was founded in 2003 in the city of technologic innovation, Silicon Valley. Elon Musk and the other cofounders believed from the start that it could become a standalone leader in a market that was already extremely saturated and highly competitive. Tesla sought to create an electronic vehicle that would be an integral part of a company that is now referred to as a hybrid between an American automaker and “energy storage company”.

“Tesla’s mission is to accelerate the world’s transition to sustainable energy.”

We look at two companies, on opposite ends of the spectrum; Tesla – a company looking to quickly gain market share, compared to General Motors who has been in business for over 100 years. Both share a common purpose of serving consumers with the power of a motor vehicle.

Small Fish in a Big Sea

This is where the story begins. The thing is, Tesla Motor’s valuation is ¾ of General Motors. However, its production makes up only a tenth of GM. Currently, Tesla’s market cap is at $29.2 billion in comparison to GM’s $48.5 billion. Looking closer into this situation, it is important to understand that the automobile industry is all about scale.

Car companies are competing with similar products. A standard vehicle is no longer appealing to the millennial car buyer. It is companies like Tesla who are being rewarded for its innovation, which has allowed them to capture market share in a competitive space. Tesla has taken risks, risks that have surely paid off and will allow Tesla Motors to grow as it continues to roll out new vehicles in the future.

Tesla is breaking every rule of what a car company should be and investors are rewarding it for doing so. All, telling by the market valuation and how investors are reacting to its stock (TSLA).

Cars or Energy? Pick One…or Both.

As mentioned earlier, Tesla has also been referred to as an “energy storage company”. Co-Founder and CEO, and Product Architect, Elon Musk, truly believes that there will be a future when all vehicles will depend 100% on electricity or alternatives to gasoline and oil. Tesla will stand by this motto and become a supplier of electric parts to gain the cooperation and ability to work alongside other car makers. By doing so, Tesla has the capability to continue to dominate the electric vehicle industry by becoming a supplier that other makers will soon rely on, in order to grow and flourish.

Knowing Tesla’s Executive is a Musk

It’s imperative to get back to Tesla’s roots and the man behind the magic. Elon Musk is running the show of this technologic
al craze. In 1998, he co-founded PayPal, an online payment service company that was entering a market, which was moving quickly and attracting the
introduction of new, innovative products/services each day. Tesla, similar in a way, is a cutting-edge, innovative, brand new product.

Musk is an innovator, always thinking of new ways to better his projects. He is trying to “disrupt an established and technology-adverse industry” by the power of the Tesla. Due to his many controversial and outlandish ideas, questions have risen regarding his leadership and direction with the company.

After reporting its first profitable quarter on October 26, 2016, there are still many consumers who are hesitant to pull the trigger. Many people are satisfied with the car companies they already trust and are scared to take the leap of faith. However, those who have started making the switch have been seen in increasing numbers as time passes. Tesla’s newest Model 3 sedan has over 375,000 preorders.

Investing in Tesla

Being that Tesla’s concept is completely new to the consumer, it is frightening, yet, exciting. This is the future and investors are seeing this through Tesla’s growing stock price. So great that,
“automobile manufacturers have entered a race towards the development of sustainable cars, and shifts in customer demand will drive production in the future.”

Investors are trusting this company by looking at its growing numbers in sales. Its projection rates are growing astronomically and the car maker is being faced with manufacturing inventory challenges today. Although seen as a challenge, this is an issue that most companies want to be facing. It is incredible that investors have wanted to trust this company from the beginning all because of its concept and the man behind the madness. Tesla Motors just recently became a profitable corporation; however, that did not stop investors from trusting this technologically-savvy vehicle from its inception.

Musk has provided our world with the future; a vehicle capable of technological, energy-saving power that one could have never dreamt of actually operating on the roads today. This is a vehicle of its own.

It’s ALL good, or is it?

We must take a step back as it is crucial to analyze Tesla Motors’s values and initiative as an automobile and energy storage company. Is Tesla moving too fast all at once? Yes, I firmly believe it is great that they have been able to single-handedly dominate the electric vehicle space, but more distinguished and respected automakers are headed directly for them because they see this being the future.

More recently, Tesla has announced that is not only is going to continue to just dominate the space of electrical vehicles, but also solar energy. Let’s evaluate this company as a whole. It has been able to grow its production from 50,000 vehicles to over 500,000 in just three years. The numbers are incredible, making leaders of this company only want to try new things and continue to be a relevant name in the technological, energy-saving industry.

The Path to Success is Up in the Air

It might be a good idea for Tesla to focus on one specific thing. Should they be focusing on the idea this company was created on in the first place, electric vehicles? Or, should Tesla focus more on research and development in the alternative energy space? When we look at Musk from an outsider’s perspective, it seems like focusing on one product at a time will not be the case.

Though it does not appear that Tesla is taking any initiative to slow down, it is imperative to look at all aspects of the empire in regards to this automobile maker. There are a lot of obstacles that Tesla is willing to face head-on and by thinking together critically, we too can discuss the future of Tesla Motors for the betterment of the investor, the company, and its stakeholders.

 

 

Sources:

http://themarketmogul.com/teslas-road-to-success-is-not-car-manufacturing/

Castellanza, Luca. “Tesla’s Road To Success Is Not Car Manufacturing.” The Market Mogul. N.p., 15 Aug. 2016. Web. 10 Nov. 2016.

http://www.usatoday.com/story/money/business/2016/08/20/tesla-gigafactory-lithium-ion-batteries/87684228/

McDonald, Michael. “The Key Challenge to Tesla’s Growth.” USA Today. Gannett, 20 Aug. 2016. Web. 10 Nov. 2016.

http://money.cnn.com/2016/11/02/technology/tesla-solar-city-solar-roof/index.html

McFarland, Matt. “Tesla Is Killing off the Ugly Solar Panel. But There’s One Problem.” CNN Money. N.p., 2 Nov. 2016. Web. 10 Nov. 2016.

 

Trade: the transfer of ownership of goods and/or services from one entity to another.

A slow-down in trade seems improbable at a time when the United States seems to rely more and more each year on cheaper Asian and European manufacturing processes; however, this is no longer the case.

What happened?

Back in late-August/early-September, the Hanjin Shipping Company filed for bankruptcy in South Korea, forcing many of their ships to be stuck at sea. To show how much damage this filing can make, Hanjin Shipping Company is one of the world’s top ten largest shipping container carriers in respect to capacity. The company transports over 100 million tons of cargo every year across the globe.

In order to show the extent to which Hanjin’s influence on world trade exists, the total value of the United States’ imports and exports fell by more than $200 billion last year. According to Binyamin Appelbaum’s article in The New York Times, this marks “the first time since World War II that trade with other nations had declined during a period of economic growth.”

Interestingly enough, Hanjin filed for bankruptcy in the U.S.’s bankruptcy court in Newark, New Jersey. By doing so, Hanjin would be allowed to dock its boats, without any cargo and equipment being taken as collateral by creditors.

Other Impacts on World Trade

The downfall of China in the ranks of world trade has created an incredible loss in supply of goods coming overseas. As opposed to the 1990s when seemingly everything that was bought said, “Made in China”, today there is a decrease of 25% of these goods. China has begun to produce more of what its people consume, and they are consuming more of what they make. This has forced a shrinkage in the number of exports they are shelling out and the number of imports they are bringing in. With smaller trade volume in and out of China, the entire world will feel the lingering effects.

What Hanjin Means to South Korea

Most recently, as reflected by Hanjin Shipping Company’s stock price, South Korea’s government has created an industry rescue plan. As a result, the stock closed up 24.8% from the end of the weekend. This is all speculation and reports that ever since the company’s financial collapse in late August, Seoul, the nation’s capital, has tried to get the shipping company back on track at an earlier time than expected. Also on October 31, 2016, Hanjin received five bids for its United States-Asia business. The shipping industry is so important to South Korea that the government’s goal is to create a state-backed ship financing company, that will help to improve the health of the current situation. There is a need for shipping in and out of Asia, and South Korea sees a promising future as long as there are new vessels, upgraded machinery, and intelligent executives at the helm of these firms.

The Shipping Industry and the Market

As of December 30, 2015, Hanjin has
amassed a 73.95% loss in its shares, compared to the industry’s loss of 19.23% year-to-date (YTD). Hanjin was responsible for seven percent market share on the Asia-U.S. trade in the first six months of 2016. Although a 7% market share may not seem like a lot, trade between the United States and Asian continent has exported $286 Billion and imported $641.4 Billion.

With hopes to turn things around, we should see a buyout of some of Hanjin’s shipping duties and equipment within the next couple of months.

 

Sources:

http://www.nytimes.com/2016/10/31/upshot/a-little-noticed-fact-about-trade-its-no-longer-rising.html

https://www.census.gov/foreign-trade/balance/c0016.htm

http://asia.nikkei.com/Business/Companies/Hanjin-Shipping-stock-soars-on-Seoul-s-industry-rescue-plan

http://www.reuters.com/article/us-hanjin-shipping-debt-idUSKBN12U0Z9?il=0

The introduction of technology through a variety of platforms has greatly affected a number of different industries, including automobiles and oil production. Technology has changed the automobile industry through the introduction of electric vehicles (EV) and modernization of fracking practices. According to an article in BBC News, “Fracking is the process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside”. In correlation with increased technology and automobiles, is the concern over oil prices for the general public and corporations. Although oil prices are impacted by many things, from technology such as fracking, to war and peace in conflicting regions, the main contributor is the battle over changes in supply and demand.

Significant economic events will also impact the amount of oil consumption. For example, Iran’s re-emergence into the world’s top oil producers will help to increase supply, which could eventually surpass demand. When supply is greater than demand, prices of oil will decrease so that people will be attracted to buy more gasoline at that moment. This will also be used as a tactic during times of economic turmoil, when the general public does not have the funds to spend money on gas. During the Financial Crisis of 2008, people were so worried about the outcomes of their financial investments that they saved all the extra money they had for necessities. People decided to make the switch from driving their own cars to using public transit as a means to save money. As seen in Figure 1, the
re was a decline in US petroleum consumption between the years of 1949 to 2014 after each war and econ
omic crisis. The average price per gallon of gasoline in the United States fell from $4.08 in June 2008 to $1.61 in December 2008. A shortage of demand for the supply that was available, created a surplus in gasoline and the need for a reduction in prices. As a result, there is a direct correlation between world economic events and supply and demand of oil, leading for a change in prices.

Over the last several years, United States production of oil has nearly doubled. This has lead to more competition, forcing Middle Eastern exporters to find new areas to sell to. Although Russia has constantly been through economic issues, it continues to hold its rank as the number one oil producer. The current price of crude oil hovers around $51.18 per barrel according to Reuters. In comparison, a barrel used to sell at above $100 at the midpoint of 2014. It is believed that this is a result of large oil companies reducing investments in new technology and exploration for new oil. According to a research report produced by RBC Capital Markets, “projects capable of producing more than a half-million barrels of oil a day were canceled, delayed or shelved by OPEC countries alone last year, and this year promises more of the same.” To reiterate the question that people ask of what drives a change in oil prices, it is a result of supply and demand, but as a result of competition. Companies are pulling out of new opportunities to find oil because the costs outweigh the benefits. In the past, drilling for oil created a cash cow that families like the Rockefeller’s were able to establish untouchable fortunes as a result. Surging United States’ production of oil has created cheaper prices for Americans due to cheaper transportation and importation costs and the ability to export oil to other countries. With increased competition among corporations and on a global level between countries, the supply for oil is increasing at a rate that demand is unable to keep up with.

The introduction of electric vehicles has increased competition among the automobile industry. EV sales are increasing month-to-month in comparison to the same month during the previous year. However, this is not enough to keep up with total vehicles sales. The introduction of electric car dealerships, such as Elon Musk’s Tesla, has created a new target market for those who want to drive environmentally friendly vehicles. Total vehicle sales have increased from 2009 to 2016 by about 74.5%. September U.S. auto sales reported strongly at 17.8 million vehicles. Total electric vehicle sales during the month of September was reported at just below 17,000 units. The previous numbers are important to refute rumors that an increase in electric vehicles on the road will lead to a decline in oil prices. Ryan Lance, CEO of ConocoPhillips, stated that EVs “won’t have a material impact for another 50 years”. Yes, there is major growth in the industry and an increase in population of people who are looking to buy plug-in vehicles, but there is not enough competition to all-gasoline cars to disrupt oil production.

The Organization of the Petroleum Exporting Countries, also known as OPEC, plays an important role in determining the supply and production of gas. The oil minister of Saudi Arabia, Ali al-Naimi, is determined to keep oil production consistent in 2014. OPEC has the power to decide to cut production as a means to increase prices and revenue. Mr. al-Naimi firmly believes that keeping oil prices where they were would help to stimulate global economic growth. To show the rarity of reducing production, back in September, members of the organization agreed to cut production for the first time in over eight years. Fast forward to today, Russia’s Vladimir Putin showed support for OPEC’s proposal to “freeze oil production in order to reverse the slump in global prices”. He stated that oil prices have decreased by more than 50% in two years due to surplus production. Not only would freezing oil production raise the low prices of oil, it will also help to prevent price fluctuations in the future. Putin is in favor of freezing production, or reducing supply, to raise prices so that Russia can remain the dominant power of the oil industry. Currently, oil and gas make up 70% of the entire country’s export incomes, resulting in a decrease of about $2 billion for every dollar that oil prices fall. The organization is aiming to cut about 700,000 barrels per day at its next meeting on November 30, 2016 in Vienna, Austria. Many nations fail to reach agreements at these meetings because they are greedy or are involved in political battles with one another. For example, the proxy war between Iran and Saudi Arabia, two of the world’s largest producers of crude oil, has created tensions that would force them to refuse agreement in order to prove a point. There is no question over the strength of OPEC and its ability to make a decision that could either raise or cut the price of oil. However, as mentioned previously, the simple issue over whether prices will be increased or decreased comes down to worldwide supply and demand.

There is not a single, clear-cut answer to determine what the main force behind the change in oil prices are; however, we can correlate the change to surpluses and deficits in supply and demand. Economic events, such as the Iranian Revolution in 1979 and the Financial Crisis in 2008, were main contributors to changes in supply and demand for oil. The revolution created an oil shock throughout the United States, when oil exports were severely cut from Iran, decreasing supply. The economic crisis in the U.S. affected the other end of the spectrum, leading to a decrease in demand from oil consumers throughout the nation. Competition amongst oil producers around the globe has increased significantly over the last decade, forcing companies to slash prices in order to attract buyers for an excess supply. Lastly, OPEC, the dominant oil production coalition, has the most control over the oil industry and the ability to make decisions regarding prices and production. Talks about freezing production are lingering throughout Europe, specifically Russia, with hopes to reduce the supply and increase prices. Overall, each example provided refers back to the simple economic principles of supply and demand. When supply is greater than demand, prices go down; and, when demand is greater than supply, prices go up. Oil consumption and production are resulting forces of supply and demand.

 

Works Consulted

BBC News. “Opec Oil Output Will Not Be Cut Even If Price Hits $20.” BBC News. N.p., 23 Dec. 2014. Web. 10 Oct. 2016.

Cox, Lydia. “The Surprising Decline in US Petroleum Consumption.” World Economic Forum. N.p., 10 July 2015. Web. 10 Oct. 2016.

EIA. “U.S. Natural Gas Total Consumption (Million Cubic Feet).” U.S. Energy Information Administration. N.p., 30 Sept. 2016. Web. 11 Oct. 2016.

Krauss, Clifford. “Oil Prices: What’s Behind the Volatility? Simple Economics.” The New York Times – Energy & Environment. The New York Times, 29 Sept. 2016. Web. 11 Oct. 2016.

Reuters. “Auto Sales Down in September Even After Bigger Dealer Discounts.” Fortune – Auto. N.p., 3 Oct. 2016. Web. 9 Oct. 2016.

US Energy Information Administration. “World’s Top Oil Producers.” CNNMoney. Cable News Network, 22 July 2016. Web. 10 Oct. 2016.

Wise, Alana. “A Legendary Investor Thinks Electric Cars Will Raise the Price of Oil.” A Legendary Investor Thinks Electric Cars Will Raise the Price of Oil. N.p., 25 Sept. 2016. Web. 27 Sept. 2016.

We often search to find indicators to help us prepare for the good and the bad. An economic indicator is defined as a statistic used to gauge future trends in a nation’s economy. Reports on these indicators are released monthly, quarterly, and annually to help the public understand how things are going within our country. Gross Domestic Product (GDP), personal income, and retail sales are among the more popular indicators we analyze.

However, there are many other markers that people have come up with to predict the economy. Notoriously known by its slogan “i’m lovin’ it” and its clown mascot, McDonald’s has contributed to create affordable meals during times of need. While most people are nervous and sad when the economy is falling or acting poorly, the Happy Meal Indicator reacts in direct correlation with the economy.

At McDonald’s and other restaurants around the globe, the Happy Meal Indicator works such that “in an effort to protect profit margins, restaurants downsize free offerings to kids like crayons and toys” (Platt). This measure allows us to see how big corporations are adjusting to the poor economic activity and loss in revenue. During the 2009 recession, gourmet burger chain Red Robin halved the amount of crayons they gave to kids to color at their tables. I would assume many children were upset that green was no longer when they were given blue and red crayons.

There are no actual numbers that can be calculated from the Happy Meal Indicator, other than alerting us how the hospitality industry is reacting. By analyzing the expense cuts on things such as toys, crayons, and other freebies we are able to predict that corporations have less free cash on their balance sheet and spending is becoming a concern. Another example of this is that many hotels held back from leaving chocolates on their guests’ pillows during the recession as a means to save money.

Although restaurants like McDonald’s and Red Robin look to cut costs during these hard times, they have a better survival rate than others. People want to find the cheapest alternatives to feed their family and support a “normal” lifestyle, so they turn to the dollar menu and cheap food options.

We may or may not notice when our favorite brands have left out a toy in our happy meal, but economists do. There are reasons behind this madness, the themes of toys always coincide with the latest hit film or a major event going on. It is a way to attract people to spend more money; however, the companies can sometimes no longer afford this marketing stunt. Now understanding the Happy Meal Indicator, we will be one step ahead of our colleagues only by knowing whether or not we receive a toy or if our Red Robin no longer has crayons.