Question

Explain and identify the features of worldwide cartelization of oil via the 1928 Achnacarry Agreement. What is the consequence of this era? Particularly, how does the International Petroleum

Answer 1

Answer

In 1920s the price wars among bigger oil companies prominently the one in India in between subsidiary of royal dutch shell and the standard oil of new york, scared and threaten then profits of major oil companies,particularly those having relatively high production cost in the US. In the month of August in the year 1928 a secret meeting was held at Achnacarry Castle in the scotish highlands .There is this As-Is-Agreement was signed and documented by the leaders of royal dtch , anglo persian oil , and standard oil of new jersey.Later the agreement form the base of United states senate subcommittee in the year 1952 which is known as international petroleum cartel.There are 7 principles in As-Is-Agreemnent to restrict the excess competition resulting in overproduction by the division of market ,price fixing , production capacity expansin limit. In the middle east the agreement affected the development of oil production capacity due to the price limit competition in the market of products which leads to supporting the product price from high cost making primarily americans , crude oil.This was the strategy which was implemented as the BASING POINT system .Under the basing point system all the sellers estimated delivered price as the Addition of FOB price at more loction or one that basing point additionally a standardized freight charge form delivery point to point. It ensures same price for all sellers This prevent the low cost producer to take advantage in mrket expansion their shares by passing on low costs.

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