Free Essay Sample «The Global Oil Industry»

«The Global Oil Industry»


An oil industry is an industry that does produce and deliver oil and other lubricate related products or derivatives. The oil business on the other hand involves the organization and people that are engaged in the oil marketable trade while the oil company refers to a commerce that does sell oil (Blanchard, 2005). Pipeline Company as well is related to the global oil industry and it involves the corporation that is responsible for operations of oil pipelines for the oil manufacturing. The global oil industry does involve the petroleum refining which is a thick and highly flammable concoction of the gaseous and liquid products as well as the solid hydrocarbons that are naturally present in the underground or below the surface of earth. This petroleum is separable into various fractions such as the innate gas and gasoline, paraffin, fuel as well as other related lubrication oils and kerosene buff in addition to tarmac and naphtha. The mixture is too used as an unrefined material in the fabrication of various byproducts.

Present oil industry

The present global oil industry involves the planetary undertakings that are related to the petroleum explorations and its extraction for refining as well as the transportation which is mainly through the usage of tankers and pipelines in addition to the promotion of the oil harvest. Fuel oil and the petrol kind are the larger productions of the global oil in present times due to their demand and ease of production. The global oil industry does as well involve the chemically based productions such as pharmaceuticals and other solvents that are easy to derive from it, fertilizers and pesticides in addition to plastics. The global oil production is in a tabular form shown below:

Global consumption

Oil industry does account for a significant percentage of the global energy consumption. It is statistically shown that Europe is the lowest consumer of the petroleum based energy with a 32% and Middle East is the biggest reliant of the sector with a 54% energy consumption rate. Other regions such as south and the Central America do at a 44% relay on the sector, Africa at 41% and North America requires a 40%.It is globally proven statistically that the world does consume around 30 billion barrels of oil each year. United States alone did consume around 25% of the global oil production in 2007 (Yergin, 2008).

The global petroleum production industry as a whole is one of the largest industry sectors in relation to the dollar significance. Despite this consumption there are variations in global market prices of oil. The table below shows the variations in market prices: A case study of the West Texas.

The USA government for example does offer huge subsidies to the global oil industry and major tax exemptions on the various stages of production and distributions of oil to ensure that it is able to refine and offer to the market amounts that are able to sustain and supplement the sector( Falola & Genova, 2005),. It too does lift tax exemption mechanisms to ensure that the costs of the oil field lease are minimized and the equipments necessary for drilling are available at reasonable and motivating costs. The global oil Petro pump prices are as shown:

Oil reserves

The current global oil industry id subdivided into;

Upstream: this is the stage where the exploration and the development as well as the manufacture of crude oil are done.

Down stream: This is the second stage of the global oil sector and it involves the transportation through oil tankers and the refiners as well as the other intermediaries such as retailers and the patrons.

In addition to the above, it involves pipeline section, and marine, as well as the service and supply sector (Parra, 2009). The global oil industry has recently undergone significant changes that have resulted to the global rise in oil demand despite the rampart drawbacks in the discovery of oil new sources a factor that has hiked the international politics as well as the geopolitical tensions that are linked to the oil production through discovery, distillation and sale. This is because the global markets have in recent times bulged and they need more oil than the prior necessary to be able to outdo the ever increasing demands.

Amongst the global oil reserves in present times, Middle East is the largest player. This is the region that belittles all the others in the reserves context and this ensures it is prominent in the globe opinionated phase. From LeVine (2007), Saudi Arabia boasts of at least 21.9 percent of the global oil reserves though the regions of North Sea and Canada still do have substantial reserves as well.

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The precise dates when the reserves will dry up are not known though experts argue that the peak period is approaching.

Peak oil

This refers to the specific time in point when the maximum rate of the global extraction of oil shall be reached. This is the point after which the production rate shall be declared as experiencing a mortal decline. This is not easy to tell because the recent global oil committee pinpointed that they have enough reserves but the same thing was said many years back. Peak oil is based on the realizable production of the specific oil wells as well as the whole assemblage of the wells (LeVine, 2007). The aggregate rate of oil production in a particular oil well does curve to the positive end until the production rate does peak and latter goes to the declining end. This well explained by the Herbert curve that is applicable to the global rates of the petroleum production. A significant confusion between pick oil and depletion exists and peak oil refers to the instance of maximum production while oil depletion stands for the duration the reserves are retrogressing.

Herbert curve shows that between the year 2000 and 2050 oil reserves shall be at their peak and the future will experience depletion and by the year 2200, the oil wells shall be dry (Klare, 2008). This is shown below.

Demand for oil in present times

Demand is related to the consumption rates and growth. The crude oil demand till 2006 has been growing at the rate of 1.76 percent annually. Between 2003 and the year 2004 the demand rose by a percentage of 3.4 and this was an alarm to the much needed oil globally. The consumption is projected to spur to around 37% by the year 2030.Oil demand is highest in the developing countries with the United States being the biggest consumer.

Due to the recent countries growth, and the industrialization aspect as well as the rapid urbanization and the higher living conditions oil energy consumption has grown significantly (Parra, 2009). Due to this there are many economies that are becoming big consumers of the oil based energy. For instance the china consumption through 1996 and 2006 has grown with a rate of 8%.

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It was estimated through the Energy Information and Administration Organization that United States reliance on the oil based energy would go down by 7% in the year 2008 and this was one of the steepest declines in the USA history. This was because they believed that the country was able to adopt the bio fuel and other efficient energy forms by the year 2007.

The future of oil industry


Future success in the sector would need the continuous adaptation of a reasonable business model that is fit for the unforeseen challenges (Yergin, 2008). The demand for the oil will continue to rise because they are taken to be and will still remain the market leading sources of energy. This continued demand of the energy will see the oil industry towards more growth and development. Oil is a vital energy source, and its global presence has made it to occupy a significant position in the energy sector. This will continue in the future as well due to the fact that other energy sources are not sufficient to support the existence of the reasonable industrialization and global energy demands.

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From Falola & Genova (2005), a continued growth in the exploration success and manufacture is as well anticipated in the oil industry. This is because the areas those are open for oil exploration will be explored through the usage of superior technologies that stand little chances of failure. The success in this instance will facilitate the growth of the industry and thus making it stronger and reliable to sustain the global energy market demands. Additional wells will be realized with huge amounts of crude oil and this shall facilitate the bigger global energy source toward it greater significance.

The oil prices would in the future grow substantially or not at all. This is because there is no particular method of price prediction or taking the control of it due to various variables that are to be covered in its context. Prices may go up if the prime oil and depletion oil come into reality while if more inventions of significant oil wells are successful it will lead to the price reductions. Due to the variations, the oil industry might in the future become more developed or rather retrogress as the price varies significantly in the global market.

It is getting harder by the day for the oil industry to find more oil and gas well (Rubin, 2009). This is because the recent consumers are discovering more oil at the deeper ends of the oceans and land hence denying the other producers the chance of enjoying entity production. This makes the oil industry to anticipate fierce competition in days to come as well as the poor market prices due to the oil discoveries in the consumer home and the reduced need of importing oil energy. If all the recent consumers produce their own oil energy, them the future of the oil global market would be uncertain as any of the possible players shall be sustaining themselves energy wise.

To realize success in the future in oil explorations will involve the usage off modernized technologies that are better and are superior to the capabilities of the olden exploration machineries. Usage of modernized technologies will result to more oil discoveries a factor that makes it more realistic to the growth of global oil industry and market. Technology will in the future result to more explorations hence making it to have oil reserve wells that are able to meet the future demands.

Major future challenges

According to Downey (2009), the global oil industry will be faced by the challenge of ensuring that both the innovative and discovered oil resources shall be produced in a cost-effective and environmentally friendly manner. It is realistic to cut costs and produce something reasonable for the better management of the global oil demands and conventions. It is anticipated that the oil industry will in the future be faced by the challenges of producing oil in a way that is cost effective and moreover reasonable to the environmental concerns (McBay, 2006).

 It is not simple to produce oil through the most cost effective method yet the market needs huge amounts of it. Due to the need of meting the demand of the general public at costs that are reasonable the oil industry is expected to be challenged in the future though not much. In addition this, the environmental concerns are as well expected to be met in the oil production and refinery as well as transportation of the oil related products. Due to the need of being responsive to the environment, the global oil industry is expected to be in the near future trimmed of extraordinary powers in oil refinery a factor that will see it lower down its capabilities and potential of supplying the whole globe with realistic amounts of oil.

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The global oil industry will in the future as well, be faced by the challenge of increasing demand and the natural oil field decline. This is a realistic and high magnitude problem that shall be facing the global oil sector in days to come and it is set to lower its productivity and ability to satisfy the global market of the oil energy. It is already set on how such future matters shall be handled but the pressure of maintained that challenge execution will become more sever due to the higher requirements that are attached to the role.

The likeliness of climatic changes has led to concerns for the future oil energy usage which threatens to kill the industry (Norton, 2009). Greater control on energy usage would in the future bar the ability of the oil industry to produce adequate oil amounts and this will see reductions in revenues hence the industry will lag behind significantly.

The new oil supplies will be located in areas that are far from the possible consumers (Blanchard, 2005). This will prolong the distances to be covered to the deliver refined oil to the market a factor that will see the oil industry become in efficient sources of energy.



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