Marathon's Case - the Business Enterprise

Assignment #3

Jamal Herrera

Instructor: Lisa Witzig

The Business Enterprise

5/15/2011

Analyze Marathon's product process and determine which phase is open to the greatest number of efficiency improvements. Explain your rationale.

Marathon has a detailed process in which it goes through to get gas and other petroleum products to its customers. According to the video, The Time It Takes to Provide America's Transportation Fuels, there are six phases in the product process that Marathon uses. The 1st phase is receiving the crude oil at the Louisiana offshore Oil Port. During this phase the crude oil can be distributed though the four pipe lines. The second phase consists of the crude old being transported through pipelines from St. James La. to Cape line then to the Robinson Ill. Refinery. The third phase consists of refining the crude oil. During this phase gasoline and other petroleum products are produced. During the fourth phase the finished produced is transported through pipelines to the terminal locations. During the fifth phase the finished products are housed at three terminal types. These terminal types include marine, light products, and asphalt and heavy products. The final phase is when the finished products are shipped to the stations in which they can be purchased.

In my opinion I believe the refining process is open to the greatest number of efficiency improvements. Since there is such regulation behind building a refinery and that fact that people do not want to live close to refineries it is very important that the few that exist are as efficient as possible to handle the demands for finished products. There is not an option to just open another refinery due to other not being able to handle the capacity for demand. According to the video, Marathon operates six refineries in the Midwest and Golf coast. These refineries are not only responsible for processing the crude oil to a finished product, and housing the product but they also have to manage the waist that results from the refining process. If the waist that is generated as a result of the process is not disposed of appropriately it will be devastating the environment.

Discuss the relationship between the retail price of gasoline and the world demand for crude oil.

There a strong relationship between retail price of gasoline and the world demand for crude oil. The relationship starts at the most basic level supply and demand. If supply for a product is low and the demand is high then the price will rise. If the supply for a product is high and the demand is low then the price will drop. More expensive crude oil is driving up gasoline prices. Historically, as crude prices have increased, so have gasoline prices. The reverse is also true. At $94 per barrel of crude oil (2011 Jan.-Mar. average), refiners spend over $2.20 for the amount of oil needed to make one gallon of gasoline. That $2.20 represents the largest component (more than two-thirds) of the pump price. Taxes add an average of another 48 cents a gallon to the price. Refining the crude oil, storage, delivery and retailing further add to the cost of producing gasoline (Energy API, May 2011). According to the video by Marathon, Understanding Gas Pricing, there are four factors that can affect supply of gas which include:

1. Inventory levels.

2. Political