Development of Oil and Gas Industries at a Global Level

Questions: 1. Critical analys of Growing Influence of OPEC on the Global Oil industry.2. Critical Analys of economic growth from non-OECD countries on the Global Oil Industry.3. Critical Analys of Climate Change Policy on the Global Oil Industry.4. Critical Analys of Access to New Fossil Reserves on the Global Oil Industry.5. Implications for the UK Oil and Gas Retail Industry. Answers: Introduction The present report is based on analyzing and examining the factors impacting the development of oil and gas industries at a global level. In this context, the report presents a critical analysis on the veracity of the statement The growing influence of OPEC, economic growth from non-OECD countries, climate change policy and the access to new fossil reserves on the future of refining globally. In addition to this, the report also discusses the possible implications of the above factors on the oil and gas industry of the UK. 1. Critical Analysis of Growing Influence of OPEC on the Global Oil Industry Organization of Petroleum Exporting Countries (OPEC) was established in 1960 mainly to co-ordinate and manages the supply of oil at a global level. It includes major twelve oil-exporting nations across the world and holds the responsibility of developing and monitoring the petroleum policies of its member nations (Moran, 2015). OPEC is known to have a control over 61% of the worlds oil exports and hold about 80% of the global oil reserves. OPEC role is very crucial for stabilizing the prices of oil at a global level. The main objectives of OPEC are to develop coordinated petroleum policies among its member nations, to formulate strategies for stabilizing oil prices in global oil market by overcoming fluctuations and to maintain a regular supply of petroleum around the world (Heshmati et al., 2015). Consumers around the world are heavily influenced by the prices of oil as it is uniform commodity. OPEC has standardized the price of oil to be around $70-$80 per barrel. However, the member-nations of OPEC reduce oil supply in the case prices drops below the set standards for raising the price bar (Moran, 2015). The individual oil-exporting nations otherwise could increase the supply for generating more revenue and this in turn would lead to a sharp rise in the global demand of oil. The emergence of such a situation will ultimately cause diminishing of oil resources in OPEC countries rapidly. Thus, in order to avoid the occurrence of such a situation OPEC countries only produces oil in a quantity that would facilitate them to keep the oil prices high. Thus, OPEC is shaping up future of refining through having a major influence on the supply and prices of oil globally (Heshmati et al., 2015). 2. Critical Analysis of economic growth from non-OECD countries on the Global Oil Industry Developing countries that are not a member of Organization of Economic Cooperation and Development (OECD) have recently shown a rising trend of oil consumption in comparison to OECD countries (Gilardoni, 2008). This is mainly on account of higher economic growth in non-OECD countries observed in the recent years. The recent trends and figures have clearly demonstrated that consumption of oil has gradually declined in OECD countries between the period of 2000-2010 while it has increased at a rate of more than 40% in non-OECD countries such as India, China and Saudi Arabia. Huge economic growth leads to greater use of oil in commercial and personal transportation that eventually leads to greater oil consumption in non-OECD (OECD, 2007). Rapid growth in population over the past few years is the main reason behind the huge economic growth in non-OECD countries (Hilyard, 2012). Rising population requires greater amount of fuel causing a sudden rise in oil consumption in these countries. A lso, developing nations often tend to have much larger proportion of manufacturing industries as compared to service industries. These all are the reason responsible for higher oil consumption in non-OECD that is considerably influencing the oil prices at a global level. The oil prices are increasing at a great rate due to high economic growth in non-OECD countries and are also expected to raise in the future direction (Gilardoni, 2008). 3. Critical Analysis of Climate Change Policy on the Global Oil Industry Climate change over the past few years has received considerable attention at both regional and global level. The main reason held responsible for significant changes observed in the climate conditions is global warming (Asplund, 2008). As such, climate changes would affect largely oil and gas industry to a major extent. As per the Institutional Investors Group on Climate Change (IIGC) approximately 60 per cent of green house gas emissions occur from oil and gas industries that are mainly responsible for causing climate changes. Environment Protection Agency (EPA) has developed strict policies and regulations to be imposed to oil and gas industry for reducing the emission of green house gases. Thus, as a result, oil and gas industry have to invent innovative technologies and methods to abide by all governmental regulations. Also, rise in temperature due to harsh climatic conditions might impact safety of workers and would ultimately affect production of oil. Therefore, oil and gas in dustry have to renew their processes and develop a sound infrastructure in order to comply with the climate changes (Heshmati et al., 2015). 4. Critical Analysis of Access to New Fossil Reserves on the Global Oil Industry The main fossil resources used for the production of oil and gas around the world are known to be crude oil, coal and gas. However, these all are non-renewable sources of energy that are often subject to depletion (Shah, 2012). The rising rate of consumption of oil and gas at a global level is further leading to diminishing of fossil reserves at a rapid rate. Thus, oil and gas industries are turning to incorporating the use of alternative renewable energy sources to meet the future fuel demands. The alternative sources of energy such as wind and solar energy are also less damaging to the environment as compared to non-renewable sources of energy. However, the production of energy from these sources is very costly that restricts their extensive use at a global level. In addition to this, the use of electric batteries in vehicles could also prove to be an effective substitute for vehicle engines (Gilardoni, 2008). However, it will also prove to be costly in comparison to that of use of engines based on consumption of non-renewable source of energy. Thus, the utilization of all these renewable sources of energy depends on the development innovative technologies that could efficiently utilize such sources in energy production (Asplund, 2008). Thus, from the discussion held above it can be stated that the growing influence of OPEC, economic growth from non-OECD countries, Climate Change Policy and the access to new fossil reserves are having a large effect on shaping the future of refining globally (Asplund, 2008). 5. Implications for the UK Oil and Gas Retail Industry The rise and fall in oil prices regulated by OPEC will have a major impact on the UK economy. Oil prices tend to have a major influence on the on the economic activities of oil-producing countries worldwide. The UK is recognized to be a major producer of oil and natural gas on global level (Yeo, 2011). The decline or rise in oil prices around the world will have a significant impact on the UK economy as well. The significant decline in oil price would result in accelerating the economic growth of the UK. This is due to reduction on cost of production for the manufacturing industries that are heavily dependent on oil inputs. This would ultimately lead to the creation of better investment and employment opportunity in the country (Lopez, 2008). However, oil and gas extraction sector would be negatively impacted by decline in oil price but other major sectors such as agriculture and report will experience a boost up in their production level that would enhance the economic activity of t he country. The significant reduction in oil price would also considerably impact the household income. The spending power of consumers would increase with the decline in oil prices which would further support the economic development of the country. Tax revenues of the government would also increase from greater economic activity in the UK with the decline in oil prices (Yeo, 2011). On the contrary, a rise in oil price would have a negative impact on the economic activity of the country by causing a significant increase in the cost of production. Oil-intensive countries will tend to have lower production level such as agriculture and transport sector that would decelerate the economic development of the country (Lopez, 2008). Also, government revue would also reduce with the significant reduction in tax amount which would further decrease the economic downturn of the UK. Thus, it can be stated that high economic growth in non-OECD countries would lead to high oil prices at a global level. This would eventually lead to a downfall in the economic growth of the UK and would negatively affect its future growth and development. The oil and gas industries of the UK also have to comply with all the legislations and rules administered for protecting the climate from the adverse impacts of the harmful emissions emitted from these industries (Yeo, 2011). This involves major changes in the infrastructure of the oil and gas industries to reduce the emissions of poisonous greenhouse gases responsible for causing global warming. Also, the UK oil and gas industry should incorporate the use of high technological devices for extracting oil and gas from fossil reserves to minimize the pollution responsible for causing climate changes (Goldemberg and Lucon, 2010). Environmental Protection Agency (EPA) has implemented strict regulations for oil and gas industries across the world for protecting the environmental from the harmful effects of processes carried out in these industries. The major changes in the infrastructure of the oil and gas industry requires major investment and is dependent on the availability of funds. The oil and gas industry of the UK have to develop effective strategies for gaining finance in order to develop more efficient infrastructure (Hilyard, 2012). Moreover, the UK oil and gas industry revenues heavily realize on use of oil in transportation sector. However, with the increase of more efficient biofuels that are eventually replacing oil products present a major challenge before the oil and gas industries of the country (Yeo, 2011). The major reason behind the increasing use of biofuel is rise in oil prices and the governmental policies restriction the use of oil products in the transportation sector. Government of the countries around the world has implemented strict legislations for limiting the carbon emissions from vehicles in order to protect the environment. This is often driving replacement of oil products from more efficient biofuels that does not pollute the environment. As such, oil and gas industry often faces more challenge to adopt and implement more efficient technologies that reduce the emissions of poisonous gases polluting the environment (Shah, 2012). Thus, from the above discussion it can be stated that growing influence of OPEC, economic growth from non-OECD countries, climate change policy and introduction of new fossil reserves are presenting major challenges before the oil and gas industry of the UK. The oil and gas industry of the country have to adopt effective strategies for meeting these challenges in order to become sustainable in the future direction. Conclusion The above report has presented a detailed analysis and examination of the growing influence of OPEC, economic growth from non-OECD countries, climate changes and introduction of new fossil reserves on shaping the future of refining at a global level. In the context of the discussion held, it can be stated that OPEC plays a major role in regulating the prices of oil at a global level and oil prices set by the major oil-producing countries are determined by the OPEC policies. The economic growth of non-OECD countries is causing raise in oil process that can negatively impact the economic growth and development of OECD countries. Also, oil and gas industries have to comply with the environmental rules and regulations in order to minimize the climate changes caused by the emission of green house gases from these industries. The introduction of new fossil reserves such as solar energy and biofuels are also presenting a major challenge before the oil and gas industries globally. References Asplund, R.W. 2008. Profiting from Clean Energy: A Complete Guide to Trading Green in Solar, Wind, Ethanol, Fuel Cell, Carbon Credit Industries, and More. John Wiley Sons. Gilardoni, A. 2008. The World Market for Natural Gas: Implications for Europe. 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