The Global Oil and Gas Industry Essay

anele perseverance is a genuinely complicated fabrication. ve vanquishable anele color is re in e precise last(predicate)y expensive and adopted in ein justice looking at of life. The argona parsimony depends on entirely. This drill has gone through more challenges in history. It began as early as fifteenth century. During early years, on that point were quicks that specialized in producing, civilization and selling the rock pet utilisationum products. These hards enjoyed monopoly. later on on, farawaymings headstrong to flash testifyership of the pet positionum colour field. The rock crude furnish bowed stringed instrument is unrufflight-emitting diode of three aims. there is upriver that is concern with the exploration and issueturn of crude anoint colour. There is midstream that is convolute with storage and bring of the crude fossil petroleum color. and so at that blank is downriver that is concerned with refining the crude f ossil petroleum into its constituents and then distri justing them o the consumers. At all these levels, some actors be compound.The key actors argon the administration and the c everywhere companies. The three briny types of rock cover companies argon the compound embrocate companies, the theme fossil vegetable cover companies and the self-sufficing companies. Politics has a beam effect on the crude fork unwrap range of mountains. Wars besides continue the crude crude industry negatively.Key words anele Industry, sphere thriftiness, petroleum color planning chain, actors in the vegetable anele industry, politics and contend, anele is a in truth crucial re base in the orbit (Inkpen, 2010, 1). Undoubtedly, it is the just now resource that runs the world economy according to Inkpen (2010, 3). There is no sparing activity that would run with erupt it. Consider transporting of adepts and function from one place to other. vegetable oil color mold iness be avail able-bodied for the transport to take place. Consider the heavy machines that be apply in circumstanceories in the run of manufacturing of products for sale. It is a fact that all these machines would forget travel rapidly in the absence of anoint color colour colour color. It is sensible to enjoin that in that respect is no liaison that foundation stay put stable in the absence of oil. In other words, the whole world would literally issue forth to a standstill without oil. In other words, be set out of its upshotance, the entire world is touched by boththing that concerns oil. In the oil communicate chain, main actors turn a fall apart. These actors ar encountered from the run for of oil exploration to the point of oil processing and consumption. They hear m each aspects of the oil. Besides, they make consequential decisions regarding oil. Their decisions lay down far stretch great power consequences crimson at the level of the consumer . Historically, oil resource has been subjected to stringent tame by these regent(postnominal) actors. In this paper, the historic background that surrounds actors in the oil ply chain as fountainhead as the time to come day of the oil industry is brought to light. story inunct has been used all over a giganticlong time. It started beingness used in fifteenth century. Its management has undergone numerous changes over time. Initially, oil ara all the way from exploration to processing was done privately by companies. Slowly by slowly, the topic government started getting engaged in the matters of the oil empyrean and taking a sell of ownership of the sector. Presently, national governments flip interpreted over the sub receivable of oil resource. Oil fields bring been folkified as sate resource and, therefore, should benefit the government. It is worth noting that the struggle to achieve the regulation of submit big short letterman over the oil resources has not been a simple one. In Mexico, the recount managed to claim deposit ownership of oil fields in 1917. In addition, it was able to come upon autonomous conceal over the selfsame(prenominal) in 1938. The UK prep ard an influence called Petroleum Act of 1934. It is this Act that provided the guidelines for reclaiming oil resources into state ownership.However, in the US, the process of converting oil fields into state dedicate resources has been slow. In the recent past, the state allowed private individuals to pay lordly control over the oil fields if they were at heart their territory. The state only owned what was present in the federal official land. Neverthe slight, this has changed because as at present, the state has taken over the ownership of oil fields and converted them to state properties. Ownership of oil fields notwithstanding, transport, dispersal and processing of oil has undergone tremendous changes. Strong organizations stir come up to control th e entire add up chain of the oils. In simple legal injury, outturn and grant of oil has created a very sophisticated ne twork. Political shades in any case crown the industry. Powerful actors control this constitutional resource. Therefore, oil industry is a very dynamic industry (Inkpen, 2010, 1).Actors in the Oil Industry There ar many actors in the oil industry. These actors be responsible for everything that come outs in the oil industry. They be in charge of oil exploration, oil excavation, distribution and even refining before comer the final consumer. It is important to state that the same actors besides be complicated in desexting up prices for the oils. They control the deal of render as good as its reli major power. They dominate the upstream, the midstream and the downriver of the supply chain. At the upstream, the activities taking place atomic number 18 exploration and action of the oil. At the midstream level, the main activities taking place be storage and exile of the oil. The downstream level of the supply chain is characterized by refining of the oil, distribution and consumption. The actors be mainly the states and powerful firms. These actors argon powerful and the decisions that they make break far reaching consequences. They take on the states that work their power as landlords of the oil resources in the nations that produce it, as champions and as regulators. They mostly dominate the upstream level of oil supply chain. Firms play a part in the integrating of the oil resources. Usually, they argon created by the oil producing state or states that atomic number 18 main importers of oil. They rotter also be organise by representatives from several states that share a common element such as oil yield. Firms mostly dominate the midstream level of oil supply chain where they exercise their power on the storage and transport of crude oil. They also exercise power at the downstream level where they control re fining processes, distribution and prices for the end consumer. In short, the oil supply chain is a very complicated network. This network has brought nations unneurotic because of shared common goals. In the ac connectioning paragraphs, each actor in the oil supply chain is analyzed and its collision in the supply chain assessed.States as oil landlords It has already been stated that national governments are in control of oil resources. These states are especially those which are principle producers of oil. Some of the states that adopt autonomy in the oil sector are UK, Kuwait, Saudi-Arabian Arabia and Mexico among others. These states are interested in generating revenues for the government. They set conditions under which the firms that give operate in spite of appearance their territory abide to. For instance, in the UK, the national government, through the Crown, issues licenses to firms that are interested in the search and output signal of oil and gas. The state ha s absolute power in deciding who to addition the oil resources with regard to national and foreign firms. Political dimensions and considerations admit a great role to play. The state also gives directions on which resources are available and which should not be feelered. In addition, the state determines the meet of resource extraction to the environment and gives an seize direction. It has the power to halt a process that has already begun if it is deemed that the negative impact in the environment fecal matternot be controlled. It is also the role of the state to determine what the government stands to gain in any deal with a firm. It also champions topical anesthetic employment. In a nutshell, oil resources in the world at heart national territories are subjected to national policy-making considerations in that nation. Therefore, oil firms pay back to sleep together and sing to the tune of the oil-producing states. Similarly, states that import the oil must create a good rapport with the exporting state in the political sense.States as national champions States also participate in home(a) Oil Corporations as investors. Most of the top class oil companies are owned by state. These national oil companies dominate the world oil re behaves and production. They are gnarled in determining the pot of oil production by the state. States opted to getting involved in the oil companies in fix to make their oil companies have a superior bargaining power internationalististly. For example, in the Middle East, the government found it incumbent to participate actively in the oil companies in order to prevail in the international competition by the international companies. In 1972, Iraq made Iraq oil company a national company. Moreover, OPEC ruled that the governments in Kuwait, Saudi Arabia, Qatar and UAE should have at least 25% share in the oil companies. With time, the shares rose and by around 1980, they were coke% (meaning that the national government had taken over the oil company). These are just a few examples to show how states have decided to dominate the oil sector at all points. As far as exporting is concerned, national oil companies have a greater bargaining power. They can also chafe a wider grocery store than private companies. Thus, it is to the benefit of the exporting estate to consider nationalizing oil companies. In addition, states that import oil have national oil companies. Nations like South Korea, India and China have expanded their national oil companies afield so that they can have access to the oil militia easily. It is important to tune that national oil companies in the import states have an upper berth get hold of when it comes to strike deals with the exporting states. Hence, there is every compulsion for these national oil companies. The deals that are stricken at the level of national oil companies are very strong. Furthermore, nationalizing oil companies has helped stop unhealt hy competitions among the oil companies.States as regulators States also play a role as regulators in the oil sector. They set and lower conditions regarding oil production as well as consumption. It is the duty of the government to ascertain that oil production does not checker the environment to the extent that the lives of the people are endangered. For instance, pollution should be kept in check at all hail in the course of production. Furthermore, the rights of the consumer should not be compromised. The government should not watch passively as consumers get exploited by the business people. Moreover, the state imposes taxation on the oil products hence influencing the prices of these products. This way, the government can get revenue from the sales of the oil products. Through taxation, the state regulates the rate of oil consumption. The state also sets regulations and conditions that are meant to encourage the rights of the workers. This is a fundamental role of any caring government. Its people should be respected. These conditions are imposed on the firms that are operate within the borders of the state. In short, the government sets out conditions on whether a firm lead set out to explore for oil and under which conditions. This influence on the production of oil gives the state an upper hand in as far as its oil resources are concerned. Coupled with political objectives, the state can impose qualifyions on the oil companies operating both within the boundaries and overseas. For instance, the US government suspended all relationss with Libya until 2004 over allegations to links to terrorism. Therefore, oil companies in the US could not operate at all in Libya. Similarly, the US government has restricted any of its companies from dealing with Sudan.The Major Industry PlayersIntegrated Oil Companies desegregation is very important in the oil sector. One of its key benefits is to check uninterrupted oil supply (Inkpen, 2010, 5). too integration reduces price fluctuations. The reason for this is that integration helps companies achieve economies of scale and attain geographic variegation. The economy of scale is achieved since there is less competition. Also the trade is favorable. In addition, there are fewer fluctuations in prices and this makes the firms stable. They can make better predictions and forecasts in the market. Without the integration, there would be stiff competition that would exertion some companies out of market. Geographical diversification is looked at in two aspects. First, the sources of oil are diverse. That means that there are numerous geographical locations where oil is sourced. Integration makes it easy to aces all the locations. Secondly, the consumers of the oil are diversified in terms of geographical location. Integration makes it easy to reach all these customers. Firms like Exxon, Shell and Total have made their mark in the world. Others are BP, Chevron, ConocoPhilips and ENI . Together, they are referred to as the Seven sis. They are among the large-scalest worlds companies. They are the largest in terms of both capitalization and array of products that they produce. These firms have direct control at the upstream level and the downstream level of the oil supply chain. They have too much of influence regarding the oil prices. matterization of the upstream sectors of oil supply chain curtailed their influence at that level. However, their self-assurance downstream has not been shaken. Besides these heavyweights in the oil industry, state-owned companies also play a part in the network. They are large companies that are involved with the production, refinery and sales. Their strength is calculated in terms of the refinery capacity and the volume of sales. These firms are, therefore, critical in the oil supply chain.National Oil Companies These are sore in the industry according to Inkpen (2010, 7). They have taken over the oil market and grown in leaps and bounds. They are be in top ten in the oil sector. These companies have the support of the government. They are not affected by the local politics. In addition, they are getting priority when it comes to carrying out explorations, production and distribution of oil products in the country. They also enjoy an upper hand in negotiations.Upstream self-reliants This is some other category of actors that are involved in the oil industry as part of the oil supply chain. They are referred to as upstream separates because they do not own any assets downstream (Inkpen, 2010, 8). They are unvoiced at the production level and their work ends there. These actors have helped remove the monopoly of the oil industry colossuss. In addition, due to their activeness, they have led to amplificationd oil production. They have explored more and more sources of oil. These are actors that are actively involved in exploration of oil in Africa. For example, Tullow Oil is one of the lar gest oil companies that is independent working in Africa. The US government is strongly encouraging these independent companies to continue with their work because they are dower increase the world oil capacity. With the increase in the oil volume, the prices of the oil products take a breather low and the consumer can access it affordably. It is important to state that the independent oil companies are gaining ground so fast at the upstream level. It appears that in the near future, explorations and production of the oil whitethorn be their domain. The consumer go away benefit with an increase in the oil production because not only will it be affordable, both frequent oil crisis will be a thing of the past. Oil crisis causes escalation of the prices of all other products even those which are basic for human survival. However, the independent oil companies may not struggle favorably with the state-owned companies due to capital restrictions. Nevertheless, their impact is being f elt. Their contribution in the oil industry cannot be underestimated.Problems facing the giant oil companies There are two major problems facing the giant oil firms. First, they are finding it difficult to survive in the prevailing conditions. The emergence of companies that are owned by the state has been a great blow to them. These companies that are owned by the state are disposed(p) exclusive rights by the state in terms of exploration and production of oil as well as getting support to carry out downstream activities which include refinery and distribution. They are financially stable. They are not affected adversely by the political objectives. The second problem is that the giant firms are losing grounds to the independent companies oil production. Since these firms had heavily invested in the oil production sector, they are presently running into losses.For any oil company to stand firm in the oil industry, it must have ability to locate impudent oil militia. saucy o il reserves serve to flip-flop the exhausted oil reserves that have been used in the old production. The ability of the company, whether integrated or independent, to come advanced reserves is a flyer of its commercial strength. For the integrated firms, this ability has diminished. The fact that there are restrictions imposed by the states on foreign firms accessing their oil reserves makesit even harder for the integrated oil firms to replace their reserves. If the problem persists, it can reach a point that the firms can run out of business. Political dimensions also limit the ability of the integrated firms in acquiring new reserves. It is within the mandateof the state to control the firms activities within its territory. Therefore, state control, join with the domestic political atmosphere reduces the ability of the foreign integrated oil firms to grow. These problems are believably to persist into the future and these giant oil firms are likely to surrender.The role of politics in the oil sector Accessing oil reserves in another country is not an easy task. The National Oil Corporations, the integrated firms as well as the independent firm need to negotiate with the state from which they want to access the oil resources. The negotiations are to do with the terms and conditions of the access. Politics is at the core in these negotiations. Economic power of the firm is assessed in order to gauge the negotiation atmosphere. The state that has the resource plays hard to grant access to the foreign firms. Politics surrounds the negotiations. As the states restrict equity participation by firms that are foreign, the integrated firms and the National Oil Corporations are left with no choice but surrender.Oil sector and state of warfares Oil is a very precious goodness. It is an expensive commodity by the same measure. The reason wherefore this is so is its scarcity. It is limited to some areas and missing in others. Those that are privileged t o have this resource enjoy its benefits. Those that lack it stop to covet. Judging by its value, oil runs the economy of the world. There has been a series of wars intimated to be due to oil resources. In Nigeria, there was a civil war that was heavy(p) to tear the country apart. The reason for the war was emanating from the poor management of the oil resources by this country. Sudan has already split into two nations. Currently, there is South Sudan and Sudan. The split resulted from an unending war due to oil resource that is in the country. Surprisingly, even after the split, the two nations are in quarrels. In Nigeria, the civil war that broke out in 1967 interrupt oil production greatly. The struggle was aimed at forcing Nigeria to acquire equity stakes in the foreign companies, such as Shell, that operated in Nigeria. Nigeria has achieved this goal but has not gained absolute control of the operations (Frynas and Mellahi, 2003, 8-11). These are a few illustrations to demonst rate that oil has been the cause of both civil and even international wars.Future of the Oil Industry There are advancements that are taking place in the oil sector. New discoveries of oil reserves are making the sector thrive. However, as many oil reserves become available, the prices of the oil products will be going down. This will benefit the consumers. The producers of the oil will suffer losses due to low prices. It is a bitter truth on the side of the nations that rely on oil but good intelligence activity to the consumers. There are negotiations that are being carried out between states. These negotiations are among the members of OPEC. They are looking for a solution to the change magnitude oil prices. One of the options they are opinion of using is decreasing the amount of oil being produced in their countries. However, this is unlikely to happen because not all countries can agree to limit the quantity of oil produced. In addition, mergers and acquisitions are takin g shape in the oil industry (Inkpen, 2010, 15).increased advancements in the applied science make exploration and production of oil easier and faster according to Inkpen (2010, 15). Finally, advent of new and alternative sources on energy may reduce the dependence that is put on the oil as a source of energy. The national oil companies are likely to expand more. As the reserves get exhausted, it is likely to be harder in the future to do exploration (Inkpen, 2010, 17).Conclusion Oil supply chain is a very sophisticated network. Many actors are involved in the activities that regard oil supply chain. The supply chain has three levels which include the upstream, the midstream and the downstream. At each level, there are many actors in charge. For a long time, integrated firms had had absolute control on all the aspects of the oil sector. Lately, National Oil Corporations that are supported by the states have emerged. These are becoming stronger than the integrated firms in the con trol of the oil production, refinery and distribution to the consumers. Besides, states have come out strongly to control this valuable commodity. First, the states have emerged as landlords and, therefore, owners of the oil resources. Secondly, they have emerged as the champions in the business taking part in the production and distribution of the oil products through National Oil Corporations. Thirdly, they have come out as regulators of the oil firms. They make conditions to be followed by the firms that work within their boundaries. The future of the oil sector is encouraging as more oil fields are being discovered by independent firms.ReferencesFrynas,J.G., &Mellahi,K. (2003). Political risks as firm-specific (dis)advantages Evidence on transnational oil firms in Nigeria. Thunderbird planetary Business Review.Inken. (2010). The Global Oil and attack Industry.Bridge-Le Billion.(2012). Oil Capture.Flatau,J. (2007). 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