Describe about the Development of Oil and Gas Industry for UK.
In this particular assignment, critical analysis as well as the possible implication of the Oil and Gas retail industry of the United Kingdom is briefly discussed. The effects of the Organization of the Petroleum Exporting Countries (OPEC) are also mentioned in this assignment in a cohesive manner (Opec.org, 2016). It is necessary to mention that, as per the standard rules as well as legislations of OPEC, 14 countries are able to export the oil and gas in the context global exportation. OPEC is mainly responsible for managing and maintaining the demand and supply as well as the prices of the oil and petroleum products in the global market.
On the other hand, Organization for Economic Co-operation and Development (OECD) is the standard organization who is responsible for helping the government of the nations along with the relevant policies (Oecd.org, 2016). In this assignment, the effect of the economic growth on the refining industries is also included for enhancing the study. Moreover, PESTEL Analysis as well as SWOT Analysis is also included in this assignment for analyzing the environmental situation of the oil and gas retail industry of United Kingdom. Additionally, the responsibilities of the OPEC as well as non-OPEC are briefly discussed in this particular assignment.
The oil and gas retail industry of United Kingdom is one of the most highly business organization that handle all t he relevant deals for supplying oil and gas in all over United Kingdom (UK). It is necessary to mention that, as commented by (Griffin and Teece, 2016), UK Oil and Gas industry already had invested more than 15 billion pound in producing oil and gas for improving the production rate from the last year.
Figure 1: UK Oil and Gas Industry revenues
(Source: Yusuf et al., 2013, pp-512)
As it is identified from the above chart the fluctuations of the revenues, which are considered in the past years are decreasing in amount. Apart from that, the below mentioned graphical representation is able to provide information regarding the import and export of crude oil in context of the oil and gas of United Kingdom (UK).
Figure 2: Crude Oil price import/export of UK
(Source: Naifar and Al Dohaiman, 2013, pp-431)
It is observed that the number of petrol fueling stations has decreased from the 37500 to 9000 in 40 years (from 1970 to 2011). That is almost 75% of the stations have closed in this time period. According to Saadet al., (2014), if the number of the closures of fueling stations are considered then it can said that the number or the rate of the closure has been decreased in the last 5 years. Mainly the independent and private, and company owned fuel stations are closed in this time. Whereas the petrol fueling stations that are owned by the hypermarkets are growing and are selling higher volume of the fuels and making higher rate of profit. The difference between the businesses is clearly visible by their market shares. As stated by Ulusoy et al., (2012), the hypermarkets have the market share of 39% in the total sold fuel volumes and the dealer or company owned fueling stations.
It has been identified that same trend is continuing on the company or privately owned fueling station that may increase the revenue. The reason behind this will be the capital constraints, competition, and business at a single site. Therefore, the pressure may cause further closures of the private fueling stations. The closure in the privately owned fueling station results in reduction of onsite storage capacity. More over it also causes reduction in number of available station in the reasonable driving time and the fragmentation of the supply chain.
Warren (2014) stated that the demand of fuel in UK is mainly driven by the higher demand rate fuel from transport sector; therefore the total demand has increased from 61% to 70% due to the demand from this sector. In the total demand the road transport consumes the majority of the total petroleum products. In the last few decades the demand a well as the price of the petroleum products has increased significantly. The price of the petroleum products is almost doubled in the last two decades in UK. The increase in the price depends on two factors, the price of the crude oil and the refining cost of the crude oil. Therefore it can be said that the closure of the refineries of crude oil will promote the price hike of the petroleum product in UK.
The autonomy related to the energy is a goal with the highest priority for each nation which wants to be free from a political shakedown or blackmailing. Different nations or international organizations like OPEC (Organization of the Petroleum Exporting Countries), which has more than 42.8% of world oil production, controls the business and distribution of petroleum products. Other significant producers of oil and of other related products are, Countries of European Union, China, United States of America, Russia, Canada and Brazil. As stated by Ahmad, et al. (2016), the countries of Middle East are the highest producers of the crude oil, and then the each and every political conflict or instability can disturb the production and transport of the crude oil. All this reasons can cause hike in the prices of the crude oil that is imported by UK.
Economic factors – The different economic factors like the influences of supply and demand on the oil price, economic stability or the situations at global and regional stage, the international currency exchange rate, and price per barrel of crude oil. In UK the 10 % of the total oil demand is utilized by the petrochemical industry. Other industries like the iron, steel, mining, auto vehicle; animal husbandry utilizes the remaining part of the total imported oil.
Social- Most of the social culture around the world considers the oil industry as a necessity for welfare and the development of the country or the society. But there are some social cultures too that considers the oil industry as the reason for the pollution of environment. These types of societies are located in the developed countries that do not need any high rate of development. As a developed country the UK has also the social culture that thinks that, the oil and gas industry is the source of the pollution in the environment.
Technological factors- Technologies that impact the oil industry from outside can also impact whole oil industry of UK. These technologies are utilized for the development of related or substitutable items. The substitutable items can impact the importance of oil by reducing the consumption of the oil and gas products.
Environment factors- For the oil and gas industry the environmental factors are the geographical position, rock structure, climate and etc. of the mines. This is important for the oil companies since this can affect the production of the oil and consequently the revenue of the company.
Legal factors- The legal factors are the laws, local authorities, and different international law related communities. This can affect the expiration, exploitation and the refining prcess of the crude oil.
According to Yap and Nixon, (2015), SWOT analysis of the Oil and refinery industry can show the aspect of future references for the industry
|
Strengths |
· Downstream operations of the energy chains that are integrated in nature · Presence of high capability engineering structure for production |
|
Weaknesses |
· Non renewable nature of the oil and refinery by products · Volatile market situations that adversely affect the operations and profit |
|
Opportunities |
· Discovery of suitable technology for achieving the greater and efficient operating profile · Establishing hydrocracker for improving the diesel of the refinery and yielding jet fuels |
|
Threats |
· Increasing capital costs and losses in the refining sectors · Environmental and Legal issues that decreases the revenue generation |
According to Loutia et al. (2016), OPEC is the major oil and petroleum price and supply determining factor of the world. It has a significant role in shaping and altering the industries structure for oil refineries. The principle motive of the organization is to maintain a price for the oil, petrol and the different byproducts of it to an optimum level. The OPEC is responsible for the flexible price of the petrol and oils. It provides and insight of the vision of OPEC for marinating the stable situations of the refining market. However, Ghassan and AlHajhoj, (2016), have pointed out that the actions of the OPEC would go in vain and the market of the oil and refinery would not be stable in future. The global prices of the oil and its products have been stubbornly being in fluctuating position due to the lack of improvement of the oil industry. It has resulted in the rise of the prices of the products and improper supply lack of the oil. Limited supply of the oil and distorted oil exportation. OPEC would play a vital role in forming a stable situation in the future market of the oil and petrol. The organization is unable to meet the market demand of the oil and petrol in the near future.
The non OECD countries manage the oil consumption in the countries of second world and they alter and manage the oil consumption. According to Artuc, et al. (2015), economic growth of the non OECD nations have a consolidate effect on the oil prices and consumption of the world. The profitability of the economy of these non-OECD countries is responsible for the amount of the import and export of the oil and petrol from the countries. The increase in the usage of the oil shows that the economic conditions are favorable for increasing the consumption of the resources.
Ceccobelli et al. (2012) described that the fact by pointing out the relation of the growth of economic conditions and the consumption of the oil from the world. The prices of the oil in the present scenario and the expected price are influenced by the demand of the oil. The organization has form alliance with the oil supplying companies for meeting the growing need of the power resource in the economic sector. On the other hand (Wang, et al.2014), have confronted the population growth of those companies for the increasing demand of the economic development. The economic development has caused the increased demand for the oil and power supply.
In today’s world the climate change is a burning issue and is discussed in all over the world. This policy is about the impact on the climate of the whole world due to the carbon emission by the use of the oil and gas. This impact helped in the shaping different problems for the climate like the creation of ozone hole in the ozone layer. Loutia et al. (2016) have pointed out that this impact forces different kind of restrictions on the oil refining industry. Therefore this policy acts as the blockage in the development of the oil and gas refining industry of UK. Therefore it is advised to develop the policy while promoting the utilization of the oil and gas.
According to Artuc, et al. (2015), the reserves are the resources of oil and gas which has been converted into the permanent storage by using the latest technology and economic strength. But as the resources are limited therefore it is impossible to increase the capacity of the reserves. The reserves can be constructed by drilling and freckling the oil resources. These reserves are helpful for the growth of the oil and gas industry in UK.
Conclusion
The influence of the OPEC, non-OECD countries and the climate change policy are the factors that have huge impact in the oil and gas refinery industry of UK. The OPEC is the primary reason which affects the prices of crude oil and gas in the whole world. As it is shown in the discussions above the increased control of OPEC on the exploration of mines, extraction of crude oil leads to the hike of price of petroleum and petroleum products. Moreover, the emission of CO2 by the utilization of the oil to produce power also affected the growth of oil and gas industry. Therefore it is advised to use the substitutable petroleum product to maintain the growth of the oil and gas industries.
Reference List
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