Strategic Modelling and Business Dynamics: A Feedback Systems Approach

8.7. Devising New Scenarios

You can devise new scenarios by varying the slider settings in either 'Oil World 1988' or 'Oil World 1995'. The sliders, which can be seen in Figure 8.18, correspond to the parameters marked in bold in Figures 8.16 and 8.17. The default settings represent a benign oil industry in which demand is stable and OPEC cooperates with independents to fully supply the market. The meaning of each slider is explained below. By understanding the sliders it is possible to create a very wide range of plausible scenarios from low-price to high-price, from stable to volatile, and from OPEC-dominated to independent-dominated.

8.7.1. Effect of Global Economy and Environment on Demand

The effect of global economy and environment is a parameter representing pressure on oil demand from the global economy or from environmental policy to limit carbon emissions. The effect can vary from −0.1 to 0.1 with a default value of zero. When the effect is zero long-term demand is stable. Moving the slider to the right results in growing oil consumption because, at constant price, intended demand (in Figure 8.16) exceeds demand. Conversely, moving the slider to the left results in falling oil consumption. With this versatile slider an Asian boom is portrayed by setting the slider to its maximum value of 0.1, whereas a green world (committed to reducing carbon emissions and using less fossil fuels) is portrayed by setting the slider to its minimum value of −0.1.

8.7.2. Cartel Quota ...