Development In Oil and Gas Retail Industries (Essay Sample)

DEVELOPMENT IN OIL AND GAS RETAIL INDUSTRIES Student’s Name Code + Course Name Professor’s Name University Name City, State Date Table of Contents TOC \o "1-3" \h \z \u I.Introduction PAGEREF _Toc455660098 \h 3II.The Growing Influence of OPEC on the Future of Oil PAGEREF _Toc455660099 \h 3III.Economic Growth from Non-OECD Countries PAGEREF _Toc455660100 \h 4IV.Effects of Climate Change Policy on Oil Production PAGEREF _Toc455660101 \h 4V.Access to New Fossil Reserves PAGEREF _Toc455660102 \h 6VI.Factors Affecting the Current Oil and Gas Retail Sectors PAGEREF _Toc455660103 \h 6Population Increase PAGEREF _Toc455660104 \h 6Environmental Concern PAGEREF _Toc455660105 \h 7Unconventional Resources PAGEREF _Toc455660106 \h 7VII.Impacts of the Rising Price of Oil PAGEREF _Toc455660107 \h 8Effects on Micro-Economy PAGEREF _Toc455660108 \h 8Effects on Macro-Economy PAGEREF _Toc455660109 \h 8VIII.Conclusion PAGEREF _Toc455660110 \h 9 Development in Oil and Gas Retail Industries Introduction Oil is the chief source of energy that the world depends on. Without oil, the world would be freezing, and people would go hungry. In line with that, all the industries would shut and suspend all their operations if oil becomes extinct. Therefore, the world needs oil to survive, and everything possible has to be done to safeguard this essential commodity. In this paper, we find out more about factors that can affect production and supply of oil among other necessary information concerning oil. The Growing Influence of OPEC on the Future of Oil The Organization of the Petroleum Exporting Countries, OPEC, is an association of the Middle East oil production countries namely; Iraq, Iran, Kuwait, Syria, Saudi Arabia, UAE, Qatar, Oman, and Yemen. The named countries produce almost 40% of the worlds' crude oil. OPEC significantly controlled the oil market in the early 80s before Russia and the USA expanded their production levels. Earlier on, OPEC had the power to sway prices of crude oil by cutting the production. However, the entry of the USA and Russia in the market has since changed everything. Due to the continued rise of the stiff competition in the oil production, OPEC has continually lost its face. One of the remarkable significance of the competition is the fall in the price of crude oil globally. In regards to that, given the entry of the US and Russia, OPEC needs to do much to regain the market relevance. Therefore, the member countries must try as much as possible to be in the market. With that, the influence of OPEC is expected to affect the consumers positively and affect negatively on the other producers. On the same note, the future of production of crude oil because of the influence of OPEC is expected to weigh heavily on the producer that would lead to reduced production. In short, the cost of drilling and lifting crude oils, maintaining wells, and purchasing facilities are expected to rise due to fall in the price of oil that would instead lead to a shortage in the long run. Economic Growth from Non-OECD Countries The oil consumption within the non-OECD, Organization for Economic Cooperation and Development, is on the high increase. Most of the non-OECD members are developing countries that are currently experiencing growth of industries. Recent research points out that the oil consumption in the OECD countries has significantly decreased within 2000-2010, whereas the consumption in non-OECD has increased dramatically by 40 percent. The rise in oil consumption in these countries is an indication of rapid economic growth. According to Zimmermann (2012), the current and the expected levels of economic growth influences current and future global oil demand and prices. Most of the non-OECD countries rely on oil as an essential fuel for commercial and industrial use leading to high demand. For instance, looking at the consumption trend against the production of countries in Africa, which are mostly non-OECD, this fact can be verified. Going by the current statistics, the production level decreased by -6% in 2010 - 2016 in Africa (Zimmermann 2012). Effects of Climate Change Policy on Oil Production No greatest issue has ever caused divide opinion among people like climate change. The term "global warming" has since been received with a mixture of fear and ignorance. On the same note, policies are being formulated, and major global fora are out to curb the possible human causes of climate changes. In reality, climate change is a global issue, and the most affected industries are the oil and gas sectors. In the US, the government regulations on the climate change policy have already impacted on the oil industry. The Environmental Protection Agency (EPA) in the US has already put in place plans aimed at reducing GHG emissions in an attempt to move the nation towards a cleaner power policy. The move has forced companies to initiate new technologies and practices under these rules. Notwithstanding, the climate change would still impact on the future industry practices besides the government's regulations. A recent report by IIGCC shows that energy-related activities contribute to nearly 72 percent of global greenhouse gas (GHG) emissions. Furthermore, 60% of the energy-related emissions are directly from oil and gas industry activities. The report further points out that the dependence on fossil fuel production is the chief cause of the GHG. In essence, about half of the industry’s value depends on the untapped reserves, or future production hence, the discord in the company priorities. Similarly, the future of oil production is dependent on the current and future climate change. According to Berman and Bui (2011), the world's environmental policies on climate change is going to affect the further extraction of oil resulting in a shortage in supply. The greenhouse gas dilemma is a fact, and the oil production industry is in the mix up on how to explore and develop new oil reserves without subjecting the environment to greenhouse gas. For that reason, the best way of avoiding the dangerous climate change according to the best science quote is to ensure that carbon stays in the ground. This implies that even the recently discovered oil should not be extracted if the carbon must remain beneath the ground. Another situation where climate policy becomes a big question on the future of oil production is the global policy of CO2 reduction. So far, there is a great contradiction between climate protection and the government policies that promotes and protect the investment oil in the US. Access to New Fossil Reserves The chief source of energy is fossil fuels that comprise of oil, coal, and natural gas. Therefore, the future of energy depends much on the availability and accessibility of fossil reserves. With the increase in the world's population, resources are diminishing, and fossils are among the resources that are not plentiful. For that reason, the limited and non-renewable natural resources would soon be scarce if not entirely depleted. On that note, some countries have taken the precaution and have become aware of the possibility of depletion of the fossils, hence, have adopted the use of renewable resources such as nuclear power and geothermal energy. With regards to the diminishing value of minerals and the recent research by pedologists, the world cannot fully depend on the fossils reserve to propel the economy once more. According to Raghunathan (2013), the research findings of the senior pedologists from the US points out that the earth is having approximately 20 years of oil left going by the current rate of consumption. The disparity is attributed to the increased demand for fossil fuels that has been experienced in the last thirty years. Factors Affecting the Current Oil and Gas Retail Sectors One of the industries that face significant challenges globally is the energy sector. In the oil industry, the challenges start from the exploration of available reserves to meeting the enormous demand. Therefore, the challenges can be categorized as follows: Population Increase The recent report by the National Petroleum Council's, NPC's, titled "Facing the Hard Truth about Energy" illustrates the problems facing the oil retail sectors. Going by the findings of the report, the global demand for oil is expected to rise by 50-60% in the next ten years, thus by 2030. The massive increase in the demand percentage is attributed to the increase in population that is proportional to demand. Therefore, the sector is charged with the responsibility of ensuring that the supply meets the demand at all times. That calls for consideration of other sources of energy, especially the renewable sources, such as the wind, biofuels, and solar. Environmental Concern Concern about the safety of environment is a great challenge too. The world is focused on conserving the environment given that the issue of global warming has received considerable attention. In an attempt to do so, the oil and gas sector is also facing the challenge of contributing to the conservation. The move would force the industry to devise safer and more environmentally-friendly ways of producing and supplying energy. As it stands at the moment, all the operations that involve extraction and processing of oil are the majority causes of air pollution owing to the remission of excess CO2. Developing new resources that match the environmental conservation strategy is a move worth embracing by oil processing companies if the issue of greenhouse gas is to be eliminated (Berman and Bui 2011) Unconventional Resources Some of the reservoirs produce oil or gas at a very low flow rates...