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«ROYAL DUTCH SHELL AND CRUDE OIL EME 460 FINAL PROJECT ARJUN HANDA Page 1 ABSTRACT This report is about the Royal Dutch Sell Company. It includes the ...»




Page 1


This report is about the Royal Dutch Sell Company. It includes the share price

fluctuations over the past few years. As Shell is in the oil and gas industry, it’s share

prices heavily depend on that industry. So therefore, the share price fluctuations almost

indefinitely correspond with things happening in that industry. Other reasons like for example, the changing of the CEO, national events like the levels of unemployment or economical trends will also be explored.

This report will also include a background and history of Royal Dutch Shell on how the company has come to be the way it has from it’s origins. There will also be a background and history on oil and how it went from being just an untapped resource in the ground to the source of fuel that powers the entire world.

This report will also include an array of timetables indicating the date of an event, what the event was, and the corresponding change in share price as a result. Graphs will also be included which will illustrate both and compare the share price behavior with the price behavior of oil. Each of the key events that were responsible for the share price fluctuations, graphs, and tables will also be explained to make it clear what each thing represents.

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History of Shell Royal Dutch Shell, more commonly known as Shell, is an oil and gas company headquartered in The Hague, which is in the Netherlands and in London, which is in the United Kingdom with offices all around the world.

Shell was formed when two companies, Royal Dutch Petroleum in the Netherlands and Shell Transport and Trading in the UK, merged in February of 1907 to compete with Standard Oil, which at that time was the biggest company in the world. As of today Shell is now one of the biggest companies in the world in both revenue generated and in terms of value.

Shell has diversified into several different areas within the petroleum and natural gas industry. In the upstream part of the industry they are very much involved with exploration and production of crude oil and natural gas. They are also heavily involved with downstream operations such as refining, marketing, distribution of petrochemicals such as petrol, natural gas, fuel, diesel, lubricants, waxes and tons of others. Shell is organized into four major groupings, Upstream International, Upstream Americas, Downstream, and Projects and Technology. The company can be described as vertically integrated as it provides services in production, manufacturing and selling.

Show provides its services worldwide. It has offices and operations in, Nigeria, Malaysia, Philippines, Singapore, Ireland, Australia, New Zealand, and the Arctic.

Shell’s primary listing is on the London Stock Exchange (LSE) as part of the FTSE 100 index under the ticker RDSA. It is currently the largest company on the exchange with a market capitalization of approximately 135 billion pounds. Shell also has secondary listings on Euronext Amsterdam and the New York Stock Exchange under the ticker RDS-A.

Page 4 History of Oil Oil can be defined as a liquid consisting primarily of hydrocarbons. It has several useful byproducts such as petrol, gasoline, waxes, lubricants etc. The increase in our reliability on these byproducts is a direct result of the invention of the internal combustion engine and the increase in passenger airplanes.

Oil is formed when dead organic matter, such as animals and plants, are exposed to high temperatures and pressures over a time period of a million years to a hundred million years. The high temperatures and pressure causes the dead organic matter to chemically change. This process happens under anaerobic respiration.

By the mid-19th century, people had learnt how to distill oil in order to obtain its byproducts. The first use was fuel for lamps. By the end of the 19th century, there were wells all over that were producing constant outputs of crude oil. Throughout the 20th century there were many conflicts and wars as a result of petroleum. It was seen as a very key component to having a successful and powerful military.

As of today, the world consumes an estimated amount close to ninety million barrels of oil per day. Approximately 90% of all cars and vehicles use some derivative of petroleum as a fuel source. Currently, the three biggest countries producing crude oil are Russia, Saudi Arabia and the United States of America. In terms of readily available oil reserves, the Middle East has the largest reserves at about 80 percent. The majority of that 80 percent is located in Kuwait, Saudi Arabia, United Arab Emirates, Iraq and Qatar.

–  –  –

Conclusion To summarize, this report has talked about lots of different events that can influence the price of both company shares and commodity prices. The events could fall under economic, changes in company management, national events etc. All of the

mentioned in this report are summarized in the table below:

–  –  –

As you see, the major percentage differences in the Shell share prices occurred only when there were major price differences in the commodity. This goes to show how dependent the company is on the commodity, issues like the changing of the CEO only have minor effects and usually tend to rectify themselves over a small period of time.

However, national events like the Hurricane Katrina catastrophe does play a significant hand in the price changes of both oil and shares. International influences such as the economic growth and Asian countries like India and China also affect the price of oil and Shell because with more economic growth in those countries there is an increase in demand for oil. Economic trends such as the weakening of the dollar and recessions can also affect the price of oil and the share price of Shell. The weakening of a dollar makes the investment of oil seem more appealing which would drop the prices and when the market has lost confidence like for example during the recession, money is taken out of the market, resulting in prices of oil and the prices of shares falling. This final graph illustrates the correlation and similarity between the fluctuations of the price of oil and the fluctuations in the share prices of Shell.

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References 2 Macalister, Terry.

"Former Shell Chief Paid £22m over Two Years despite Profit 3 "US Business Cycle Expansions and Contractions." National Bureau of Economic 4 "Civilian Unemployment Rate: Percent: SA." Civilian Unemployment Rate: Percent:

5 "RDS-A Interactive Stock Chart | Yahoo! Inc. Stock - Yahoo! Finance." RDS-A Interactive Stock Chart | Yahoo! Inc. Stock - Yahoo! Finance. N.p., n.d. Web. 12 Dec.

6 Rooney, Ben. "Oil Prices Spike to $103, Then Drop Back." CNNMoney. Cable News 7 Pederson, Chris. "5 Reasons Oil Prices Are Dropping." 5 Reasons Oil Prices Are 8 "Oil Price Rises on Gaza Conflict." BBC News. BBC, 01 May 2009. Web. 12 Dec.

9 "Oil Prices Fall from Record Highs." BBC News. N.p., 19 Oct. 2007. Web. 11 Dec.

10 Mouawad, Jad. "HURRICANE KATRINA: THE OIL SUPPLY; GAS PRICES SURGE 11 Subramanian, Arvind. "VOX CEPR's Policy Portal." India's Growth in the 2000s:

Four Facts. N.p., 5 Dec. 2011. Web. 12 Dec. 2014.

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