Production and operations Management Assignment

Production and operations Management - Assignment warningIn addition, raw cover is also used for wide varieties of other purposes. The fractional distillation of gas produces an output known as gasoline. Gasoline is mainly used as fuel in essential combustion engines. Gasoline is traded in regional market whereas, crude fossil oil is the part of global market. Generally, the impairment of a commodity increases as demand increases (there are some exceptions to this rule) (Oxford). Since crude oil is a non-renewable dexterity source, its demand exit not come to regardless of its footing variation. Hence, when the demand for crude oil increases, its price also increases. Crude oil prices have a direct impact on the gasoline prices as crude is the major raw material used in the production of gasoline and other crude products. Crude oil accounts for 55% of the price of gasoline while distribution and taxes influence the remaining 45 % (Mazeel, 2010, pp.106-107). To illustrate, one barrel of crude oil contains 42 gallons of oil. If the price for one barrel of crude oil is $75, raw material worth $1.78 is required to produce a gallon of gasoline. This figure does not involve transportation and other process charges. In total, when the global demand for crude oil increases, there will be a proportional increase in the retail price of gasoline also.When the global crude oil production is decreased by 10%, the crude oil supply might fall and this situation would probably result in a rise in crude oil price. below such circumstances, domestic oil retailers may be forced to raise their prices in order to empty loss. If Marathon adopts effective business strategies, the company may keep the price at the pump the aforesaid(prenominal) without losing profits even in times of a decline in global crude oil production. In order to achieve this goal, the Marathon has to acquire materials at reduced rate by researching contrary markets because a decrease in cost o f production is