Crude Oil Marginal Concept - Case Study Example

Marginal concept gives real insight of the cost and benefit incurred from certain production or exploration. Strategies to conserve natural resources as opposed to destroying them where the cost of destroying them is also increasing, requires thoughtful approach. For the case of crude oil which is also a non-renewable resource (a resource that cannot be reproduced and has limited supply in layer of earth) strategies to conserve these resources are critical food for thought.Crude oil, being non-renewable resource, leads to increasing marginal cost with every additional unit produced.

Marginal revenue of every extra barrel explored (/refined) is does not increase with same pace. Some basic strategies that must be applied for conserving every additional barrel of crude that would have been otherwise explored; are as follows:EFFICIENT EXPLORATION: crude oil is explored by drilling land deep down and pumping liquid which is then refined and various products extracted from it. Drilling and refining firms shall develop more efficient ways of exploration that reduces level of damage to land as well as wastage while exploration.

REDUCE USAGE: Crude oil produces many products such as heating oil, petrol, diesel, jet fuel, and propane, plastics, artificial food flavorings etc. Main usage in form of fuel for many purposes shall be reduced. For instance, electricity production from oil shall be reduced to minimum across the world by increasing reliance on solar form etc. Also all countries of the world shall focus on revitalizing living habits and increasing more energy efficient life styles such as using public transport than private transport and reaching destination by walk or mode of transportation that does not require fuel etc.

USE OF ALTERNATIVE SOURCES: Use of alternative sources which are less cost intensive such as solar, wind, tidal, biogas energy would lead to conserve natural resources.RECYLCING AND REPAIRING: Recycling products such as plastic is also an important strategy for conserving crude oil. It will result in reduction in demand-led production at industries. Every unit decrease in demand of electrical appliances due to trend of getting them repaired than replacing by new appliance would increase the marginal benefit in form conserving every extra barrel of resources or using explored resource in areas with more marginal benefits.

GOVERNMENT REGULATION AND PRESSURE GROUPS: Strict governments Regulation shall be implied on exploration and refining activities to ensure less wastage of resources and damage to earth. Pressure groups shall also put their due force in developing awareness about damage this extensive exploration is causing to earth. They shall also pressure people to divert to energy efficient lifestyle.Hence, strategies to increase the marginal benefit of conserving these resources, in particularly crude oil, are more related to overall input from society.

Demand for crude oil by these businesses will reduce when the demand for products of these businesses will reduce.