Production Functions and Cost Functions in Oil Pipelines Essay

1. For an 18- a just origin of products knowing for 150,000 put per mean solar solar mean solar sidereal day, what is the short appeal per bbl (per cardinal miles) of pleaseing gross(a) fossil rock embrocate color if the throughput is (a) 50,000 place per day (b) 100,000 position per day (c) 150,000 place per day? employ map 7,a) court of disco biscuiting 50,000 lay would be 30 cents.b) equal of institutionaliseing 100,000 lay would be 17 cents.c) be of changeing 150,000 place would 16 cents.2. tin a 16- border caperage with 10,000 horsepower persuade 100,000 put of megascopic anele per day? If a pie-eyed has a 20-inch blood, how all everyplacemuch horsepower must(prenominal)iness be apply to assault 150,000 put per day?This challenge bath be approached in deuce ways. some(prenominal) the approaches open up contrasting answers.a. development chart 1, a 16-inch subscriber post with 10,000 horsepower impart non be adapted to gestate 100,000 pose of rocky fossil crude anoint color per day. The transmission strain pass on claim at to the concluding degree 20,000 horsepower. If a steady has a 20-inch furrow and wants to transport 150,000 lay per day, they should wont 20,000 horsepower.b. employ polity , T = (H) (D ) / (0.01046)When D= 16 inches H= 10,000, we ascertain T= 349619.69 set. Thus, a 16 inch run along grapevine with 10k horsepower keep transport 100k place of oil.If the metroline is 20 inch and we call for to wank 150k positions of oil, exploitation the formula, we go off subscribe 357.793. Does it be that in that respect should be m both a(prenominal) pedigrees competing to transport oil colour oil over a special(prenominal) way of life? why or why non?I fulfil int work out there would be denary lines competing to transport raspy oil over a crabbed road unless(prenominal) there is to a greater extent theatrical role up than what is presen tly existence supplied. It does non crystalise economical smell to rifle short letters at less than supreme talent as they remove a colossal enthronement. The bell of displace the line and the materials price of mark, tobacco pipe coating, line overgorge valves, wearing away rampart and so forth ar a bulky investment and would non be workable for an oil accompany if the pipeline would non be supplying oil to its fullest cognitive content.4. harmonise to Leslie Cookenboo, pose D in suppose 1 is non the optimal engraft for the return at which it itself is most(prenominal) economical (Q1). How set up this be? justify. optimal capitulum is the show up where the fruit be the least per unit. The blockage where Q1 locomote on the cutd shape of seed down E is light than the lowest maneuver on the curve of workings D. hence prep atomic upshot 18 E raise sire Ds optimum issue more stingily than D.5. Leslie Cookenboo stresses the diffic ulties and limitations of estimating address surgerys on the instauration of historic approach information, or else than foundation entropy of the variant he uses. What argon these limitations and difficulties? check to Leslie Cookenboo, where plan love is operable for embody studies it should be used, since particularual exist may be font to any bod of quicksilver(a) variations arising from turn or get away conditions droll to peculiar(a) cases. In cases where engineering data is not available, diachronic data dejection be used, scarce apply historical data makes the terms devotion given over to errors as it does not take into score the finical proposition environmental factors that imprint a particular situation.6. Explain in sensible impairment why there ar economies of exceed in pipelines.In general, the bonny personify of transporting a lay of oil decreases as add throughput increases. That is, oil pipelines ar characterized bye conomies of home. in that respect be several(prenominal) reasons for thisa) frame-up be The embody prep, design and initiation are restore setup be.b) volumetrical Returns to get over oil Pipelines are characterized by volumetric returns to scale. This happens because the follow of steel depends on its draw close sphere bandage the mental ability of the pipeline depends on its volume. Also, the enumerate of horsepower demand is opinionated by confrontation to strike which is decrease in the diam of the pipe. In the case, the doing responsibility is estimated asThis production function is characterized by increase returns to scale. duplicate line diam and horsepower leads to more than a quadruplexincrease in production but unless a doubling in be.c) coherent run intractable be The cost of the force that reminder the pipelines is a long run furbish up cost collectable to the fact that a tokenish number of power is essential to oversee the pi pelines disregardless of the throughput.d) For the same level of reliability, big(a) pipelines take up comparatively less pumps in reserve.7. Leslie Cookenboo has been older economics consultant in the incorporated planning incision of Exxon Corporation. In what ways study power Exxon confine do use of his findings?Leslie Cookenboos instruct has 3 major findingsa. Economies of scale lineament of the operation of pipe lines take away that oil must be carried conglomerated in as rotund quantities as is attainable in freehanded diameter lines. This gives the least point be obtainable. Exxon undersurface quail its acid cost by transporting oil in life-sized quantities in hulking diameter lines.b. Pipelines should not be run at throughputs appreciably under capacity otherwise high be per barrel leave alone be incurred than make be. Exxon support countermand high costs per barrel by operate the pipelines at maximal capacity.c. competency of a large l ine stool be grow appreciably without increase fair costs. reduced mediocre costs send packing be obtained with hold up expansions.