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Weaknesses
As identified in the oil industry there are many strengths and it is evident that it is rich in production however, the oil industry is not without weaknesses. These weaknesses include the fluctuation of oil prices, the intentional destruction of the environment and the endangerment of supply.
Firstly, let’s pay closer attention to the instability of oil. Demand for oil is always high when demand gets to the point that there is not enough oil to supply it prices rise in order to keep some sort of on control on demand however, if a new oil reserve is found supply is able to meet demand again and prices fall. Nevertheless there has been an increasing use of gasoline over the years and according to the American International Automobile Dealers Associating (A.I.A.D.A), China is the reason for the great rise in oil prices. This is because over the years China is becoming more and more competitive on a global scale. There economy grows bigger everyday and like America there streets are getting filled with more vehicles and along with it more construction of highways to support all the vehicles coming in. Therefore, the demand for oil in China is almost as great as the need for it in the United States. In fact China is now the second largest oil importing company in the word; and as China and America import more oil prices will continue to rise in order to manage this intense demand. This is a factor of the oil industry that cannot be easily maintained. At the same time the competition between China and the United States for oil from the Middle East may cause serious repercussions on their relationship. The Chinese government even believes that the U.S may be striving to take control of the Middle East and the oil wells within the country. As can be seen the oil industry also tends to cause divisions between nations which can, and has lead to battle between nations, wars and terrorism threats.
Secondly, oil companies also need to focus on, and try to decrease the harm they put on the surrounding environments, or they too can be adversely affected in the long run. Just the process of drilling oil for example has dire consequences for the environment. The fluids that come through drilling are not healthy for our environment. In previous years for example, the drilling sites used oil based mud in order to keep drill cuttings from getting in the way. On the down side, this mud contained both diesel and mineral oil which caused harm to the environment. There are water based muds that are use for drill sites. The problem is that the water based muds does not work as well as the oil based muds do. Still, oil companies have to try and find more environment friendly ways of extracting their oil if the environment is to kept clean and free from harm.
Transportation of oil is also a serious problem because of potential oil leaks that can kill many of nature’s water life. For instance in 1989, 11 million gallons of oil was leaked continuously into the sea when the ship had hit a rock, resulting in the deaths of animals including seals, whales and birds. Transportation of oil can also become an economic crisis as a result of these leakages. Using the same disaster from 1989 $2.5 billion had to be spent in oil clean ups which took three years to complete. Oil companies need to set more effective systems in place to reduce, if not stop all at once, the damages that oil transportation and drilling causes to the environment.
Lastly, we must remember that oil supply is not unlimited. It is a non renewable resource. Though the earth is able to produce more oil, it will require millions of years through the process of fossil decomposition. Today, oil reserves are low. However, there are upon trillions of barrels of oil available to the world. About 34% of the oil comes from North, Central and Latin America, Europe, Asia, Africa and the Soviet Union. The other 66% resides in the Middle East, Saudi Arabia and Iraq; two of the biggest oil producing countries. On the downside of all this however, the United States seems to impose a threat on the oil industry. In the U.S, they have in place something called the “U.S. Strategic Petroleum Reserve” (SPR). Based on the writings of Alan Reynolds, a Cato Institute writer, the United States has been putting in 160 thousand barrels of oil daily into the SPR. There has been no sign of selling these collections of barrels however, and this is what concerns the OPEC. Every day, the stockpile keeps growing and OPEC is beginning to see it as threatening to the oil bosses of the oil industry. This however, may still not be so threatening, as America uses around 20 million barrels of oil a day. Still the problem remains that the U.S. could be causing some form of weakness in the oil industry through holding so much the oil.
Opportunities
The rising demand for petroleum (oil) in China creates a grand opportunity for the oil industry to increase their oil supply. China is currently undergoing industrialization as it grows to be larger, better, and more internationally competitive. The improvement in byways and minor roads together with the construction of new highways welcome this social and economic change. The highways and streets of China are now packed more and more with vehicles that are utilizing more and more petrol. Apart from the Chinese influence on the supply of oil, India is also beginning to enjoy the driving experience on improved roads and street. Hence, the petroleum industry embraces golden opportunity to meet the increasing demands both China and India for oil.
Next, the dawn of the global warming which has given rise to the green movement whilst it poses a threat to the oil industry provides an opportunity for the petroleum industry to place more focus on secondary products including pharmaceutical, plastics and grease amongst others. These secondary products produced by the oil industry have a readily available market and has yield millions to the industry over the years. Since the industry main focus is on the supply of energy based products and services, much emphasis have not been placed on secondary products because they don not yield high financial turnovers as energy based products. The pressure on the industry by the green movement forcing it to deeper forms of diversification can allow for increased employment and other economic benefits.
Lastly, opportunity exit where the oil industry can answer the call to the growing dependence by countries such as America and Europe for a safer, resourceful, and cleaner burning gas to warm and cool houses. The shift in focus by the petroleum industry to produce an increasing alternative energy source such as natural gas provides the superb opportunity for the industry in the advent of unstoppable decline in fuel.
Threats
The oil industry is faced with several major threats which are correlated to a multiplicity of smaller threats to the industry. While some of these treats seem inevitable, the industry has the responsibility to plan and prepare itself for preventing, where possible, and putting structures in place to lessen the effects of such.
The most obvious and current threat to the industry is interrelated to the topical issue of anthropogenic climate change or global warming. It is thought that the emission of gases into the atmosphere, inherent from many oil based products is a major contributor to the diverse effects that is brought on by global warming. This phenomenon has prompted many organizations and the global political directorate to plan for and take action as it relates to global warming. Many summits have been held to deal with this issue, the most recent of which was the Copenhagen conference on Climate change which brought together technocrats and political leaders from around the world. These leaders discussed and committed to ways to cut greenhouse gas emissions and scale back the use of fossil fuels, which produce carbon dioxide when burned. Plans included moving away from the use of oil based products and services which have been proven scientifically to be have adverse effects on the environment. Alternative forms of energy is being pursued and encouraged including coal, hydrogen fuel cells, biofuels, renewable energy, nuclear (thorium) and to a lesser extent natural gas. These alternative sources if used can replace most oil and oil- based products.
It is significant to note that Governments, NGOs and other organizations have committed significant human and financial resources to this process which will make it difficult, if not impossible for the survival of the oil industry. The process of hybridization in the motor industry threatens to deal a significant blow to the oil industry in terms of loss of revenue which can potentially have a ripple effect of high scale lay off among other smaller threats. With the advent of alternative forms of energy and hybridization it will be more difficult for the industry to compete against this trend towards a safer environment. If stakeholders are successful in making this alternative forms available at a an affordable cost, similar to that of oil based products and services, providing that supply of these products is greater than demand and all other factors constant, the oil industry can face a daunting challenging in getting a profitable price for oil based products. That is providing that consumers are given the opportunity to choose, in which case it is likely that considering the factors of competition, supply and demand, price of all will drop significantly. However to analyze the extreme possibility, which is in fact very probable, based on the support and investment that governments are making towards moving to alternative forms of energy, it is likely that if supply of alternatives is adequate that the use of other forms of energy can be made mandatory. The advent of such an occurrence will cause the demise of the oil industry as we know it and with it the loss of millions of jobs and investments around the globe. This threat may seem far-fetched in nature; however the lack of diversification or inability to do so within the oil industry is in itself a threat to the industry. More clearly said, since oil is what the industry do there is little or no room to do anything else. |
