O-LevelCommerceFinance7100/22 · Oct/Nov 2014 · Q820 Marks

Fig. 3 is a table showing what is included in the price of a litre of petrol costing $3. [Figure 3.0]

(a)(i)What is the cost of refining each litre of petrol?[1]
(a)(ii)Calculate the tax paid as a percentage of the total cost of a litre of petrol. Show your working.[2]
(a)(iii)State three items that marketing and distribution costs are likely to include.[3]
(b)Many garages make small profits on selling petrol. Explain how they are able to survive in business.[4]
(c)Explain how oil companies affect the Balance of Payments of countries in which they operate.[4]
(d)Oil companies use several types of transport to move their products. [goods train, pipeline, road tanker, tanker (ship)] Which types of transport would be most suitable to move crude oil from an oil field in one country to an oil refinery in another country? Give reasons for your answer.[6]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2014). The mark or mark type is shown in brackets.

[1] (a) (i) One mark for $0.20 or 20c
[2] (ii) $1.20/$3.00 × 100 (1 mark) = 40% (1 mark) OFR applies. If the correct answer is given without working, award full marks.
[3] (iii) Any three items × 1 mark each – transport/advertising/promotion/storage/market research/public relations/ communication/logistics/packaging/branding. Any other relevant item
[4] (b) Any four points × 1 mark each and up to 2 marks for a well-developed point – Selling high volume – small profits on each litre but overall profit is made Offer other services such as repairs and maintenance of vehicles Provide a shop selling newspapers and essential groceries Operate as a franchise for a large petroleum company Keep labour costs for selling petrol to a minimum by self-service at the pumps Offer shop facilities to a well-known chain e.g. Marks and Spencer Open a coffee shop selling hot drinks and snacks often with a well-known brand Offering personal service Being near to many of its customers Family business – benefits of another income or labour provided by family. Any other relevant point.
[4] (c) Any four points × 1 mark each and up to 4 marks for a well-developed point – Oil companies drill for oil and may send it to another country/ for refining so exporting oil/ a visible export/ so contributing to the Balance of Trade Oil companies contribute to the Balance of Payments of the country because the Balance of Trade is part of the Balance of Payments. Balance of Payments consists of visible trade (goods including oil) and invisible Trade (trade in services both imported and exported) – definition 2 marks max The oil company may move its profit out of the country in which it is drilling and this would adversely affect the Balance of Payments of the country Oil company exports/increase in foreign currency for country/pays for imports/better standard of living. Any other relevant point.
[6] (d) Level 2 (4-6 marks) Has discussed some of the types of transport and has given a reasoned recommendation. N.B. May consider them all. (if a candidate has discussed only one type of transport, award 4 marks max) It will depend on where the oil field is situated in the country and where the refinery is located in the other country. It will also depend on whether or not the oilfield and the refinery are in neighbouring countries or whether the oilfield is at some distance from the refinery and across the sea. If the oilfield is at some distance from the port of the country, a pipeline might be used to pump the oil to the port for loading on to a tanker. A pipeline would be suitable because it can carry liquids for hundreds of kilometres across different kinds of terrain. Although it is expensive to install, it is cheap to operate and the oil can be sent continuously on a direct route. If the refinery were in the neighbouring country, the pipeline could link the oil field and the refinery. It would be better than using road tankers as it can move oil in bulk quantities. Assuming that the oil is to be sent some distance to another country, an oil tanker (ship) should be used. It carries oil in bulk especially if it is a supertanker, and may be able to load and unload at special oil terminals in the ports. The refinery is likely to be close to the port with an unloading facility as part of the complex. The road tanker and the goods train are unlikely to be used. They will move refined fuels within the country. The road tanker will deliver fuel to garages and homes. Tank wagons, as part of a goods train on the railway, will move fuel in large quantities to fuel depots from where it can be delivered. Level 1 (1-3 marks) Has commented on one or more types of transport with/without a recommendation. I recommend using oil tankers to carry the crude oil across the sea. Road tankers could be used to move the oil from the port to the refinery. Oil should be moved in bulk. Tankers carry bulk cargoes. The pipeline might get broken. It is expensive. Goods trains might not be available.