Contemporary Business Environment: Impact of COVID-19 on Crude Oil Prices

This report examines the contemporary business environment and its impact on the oil and gas industry in the UK. It analyzes the changes in average crude oil prices from 2010-2020, the economic determinants behind these changes, the effects of government action, and predicts the immediate and future effects of COVID-19 on crude oil prices.

Contemporary
Business Environment
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Table of Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
1.How have average Crude Oil prices in the UK changed over the period from 20010 – 2020?
.....................................................................................................................................................4
2. Economic determinants of the changes outlined in your answer to Question 1?....................4
3.How has government action over the period 2010-2020 affected the UK market?.................4
4.Examine and predict the immediate and future effects of COVID-19 on the prices of Crude
Oil?..............................................................................................................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................4
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INTRODUCTION
Contemporary business environment is the environment which keeps on changing after a
period of time. It helps in developing the long term goals of the business. This type of
environment is also known modern business environment. It helps in analysing the market
situation so that goals of the business can be achieved effectively. With the helps of
contemporary business environment company can easily identify the threats which will helps in
increasing the profit of the business in the market. It also provides various opportunities to the
business to so that revenue of the business can be increased in the market and goodwill of the
business can be increased. It also develops the adaptability in the organisation so that rapid
changes cannot affect the performance of the business and goals of the business can be achieved
effectively. If the organisation will analyse the opportunities it will helps the bushiness to
achieve its goals effectively better opportunities helps the business in the utilisation of the
resources which improves the performance of the business.
Oil and gas industry of UK plays an important role in development of the UK economy. Oil
helps in transportation of the economy and gas helps in producing electricity which helps in
satisfying the needs of the economy. Oil and gas industry helps in providing economic benefit to
the country which helps in the increasing the GDP of the country. It helps consumers with low
energy cost which helps in maintaining the lifestyle of the economy. It also provides the
transportation facility to the economy so that better development can take place. In this report it
will be analysed that how contemporary business environment helps in the growth of the oil and
gas industry of UK (Nikitina and Lapiņa, 2019).
MAIN BODY
1.How have average Crude Oil prices in the UK changed over the period from 20010 – 2020?
As per the below graph prices of the crude oil has been steadily increased in February
2011 to $100 per barrel reason behind the increase in the prices was over supplies during the
Arab spring. Due to which prices has been increased in April 2011 to $125. during the period of
three and half years prices of the oils was stable between $100-125per barrel which helps in the
stability of the economy. In the year 2014 second half prices of the crude oil fell rapidly to $50
barrel due to poor global growth demand of the crude oil fell in the market. In the year 2016
again prices has been fell to $27 per barrel due to increase in the supply of the Crude oil. From
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the early 2016 to late 2018 general increase in price has taken place which was $75 per barrel.
Demand of Crude oil was high due to which prices was increased to maintain the supply of the
goods. In the last two months of 2018 prices were fell and stable $60-70 per barrel in 2019. In
the January 2020 prices were increased rapidly. Due to covid-19 situation large cut in production
has been introduced by the OPSE as the country was under lock down. Due to which in April
2020 prices fell to $25 per barrel. Rise in the prices of the crude oils takes place when the
demand of the oil increases by the economy and supply is less as compared to demand to
maintain the balance between supply and demand prices gets increased so that growth of the
economy cannot get affected. If the demand of the economy will not increase in the coming
years it can affect the profit and growth of the business and the economy (Tabachnikova and
Vinokurova, 2019).
2.Economic determinants of the changes outlined in your answer to Question 1?
Demand prices of the oil are based on the various factors like decision of the production,
supply. Demand and supply of the goods affects the prices of the industries in the market. Cost
of production also affects the price due to impact of Covid-19 demand of the oil and gas industry
has been affected in year 2020 which also affected the revenue of the business in the market.
Decline in the oil prices affected the transportation and cost of the firms in the market. The
decline in the prices of the crude oil will affect the profit and revenue of the business due to
unemployment in the economy will take place because if company will not profit in the market
then companies will not hire employees in the organisation which will increase the
unemployment rate in the economy due to which growth of the economy will also get affected.
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Decline in the fuel prices in 2020 affected the profit of the industry for many years. In the 2020
fall in the steady fall in the prices has been observed as shown in the below graph due to which
profit of the business can be affected in the economy.
This fall is prices are done by the fall in the travel due to the impact of Covid situation if people
will not move out of their houses then their use of transportation will also decrease which will
affect the demand of the oil and gas industry in the market. If the people of the economy will not
prefer travelling then low prices will not increase the demand of the industry in the market.
Small compensation will be treated to the low oil prices. Due to fall in the oil prices in the year
2020 producers of oil in Russia and Us has also been impacted because if demand of the product
will not be increased in the market production will also not take place which will affect the profit
of the production. With the fall in the prices of the oil importers of oil will get benefited because
prices for the imports will get decreased which will help the importers to increase their profit.
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UK is the small importer of oil due to which UK will have a small benefit in the business
(Gainochenko, 2019).
For the exporters of the oil decline in the prices can damage the growth of the economy. It will
also affect the budget of the government due to which higher taxes will be imposed. Decline in
the prices will affect the profitability of the energy sources. Fall in the oil prices for the long
duration of time can affect the use of transferable in the economy which affect the revenue of the
economy in the market. If the prices of the oil decline and demand of the oil will remain same
then it will affect the GDP of the economy. Decline in the oil prices helps in the providing
positive impact on the economy of UK because the overall activities of the economy will be
increased increase in the oil prices is due to inflation which decrease the growth of the economy.
When the prices of fuel were high before 2020 the growth of the economy was effected. The
demand of oil was reduced in the year 2020 due to Covid-19 situation as all the business in the
economy was restrict due to which oil prices got affected which affected the business of the oil
industry if the demand of the product and services is low then it can affect the overall GDP of the
economy which can also affect the growth of country (Harper-Anderson, 2019).
3.How has government action over the period 2010-2020 affected the UK market?
Due to the fall in the prices of crude oil government of UK started working with oil and
gas industry so that better condition can take place and profit of the economy can be maximised.
Because if profit of the business will not be increased it can affect the growth of the economy in
the market. Government has done investment so that financial scale of the economy can be
maintained. Increase in the domestic supply of gas and oil helps in increasing the UK energy
due to the decline in the oil and gas manufacturing it has raised the tax receipt of UK which can
affect the growth of the business in the market. The government of UK analysed that increasing
the supply of oil and gas domestically will helps in providing positive impact on the revenue of
the economy which will help in the development of the economy it also helps in increasing the
GDP of the economy. Oil and gas industry has linkage with the government departments of UK:
HMT, DECC, HSE etc. these departments helps in providing licensing, health and safety
standards and environmental performance. Better linkages with the government of UK helps in
increasing the export of the industry. Government has planed the strategy of improving the
conditions of the oil and gas industry of UK so that better services can be provided to the
economy. To increase the demand of the industry in the market company has to develop its
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products and services by planning the strategies which will help in increasing the profit of the
business in the market. Government of UK has made all the possible strategies to tackle the
situation of the UK economy. UK government has started working with the oil and gas industries
to design the packages so that production of the economy can be maximised. Government of UK
has to focus on the future of the oil and gas industry because it can affect the GDP of the
economy. The implementation of best strategy is required to attract the investors in the business
so that financial stability of the business cannot get affected. Government of UK is providing
their best Support to the industry so that they can recover the loss which they are going through.
Government strategies helps in increasing the profit of the economy so that growth of the
economy cannot get affected. Due to fall in prices profit of the oil and gas industries has been
affected.
4.Examine and predict the immediate and future effects of COVID-19 on the prices of Crude
Oil?
Due to situation of covid-19 prices of the crude oil has been because people were
following the restriction of the lock down which was given by the government. As per the
economist prices of the crude oil are same as they were before 160 years. Recovery in the
Demand of the oil is not estimated till now due to the vaccine which has been invented in 2021
there are chances to recover the demand of the oil industries because due to the rise in the death
rate during the Covid-19 situation people avoid to move out due to which demand of the crude
oil has been decreased. To increase the demand of the crude oil transportation is very important
if the transportation will take place proper it will helps the oil industry to increase its demand and
earn profit in the market (Sullivan, 2018). Many organisations are not allowing their workers to
join their work which is affecting the demand of the old industry because road transportation are
mostly used by the workers and staff to continue their job on the daily bases. After the recovery
of Covid-19 it will the oil industry and transportation industry to increase their demand in the
market. Low demand by the economy effect the production process of the business. Due to
which growth of the business can also get affected in the market but with the helps of the vaccine
people will use the transportation facilities which will increase the demand of the crude oil in the
market. Covid-19 has affected the profit of many business due to profit of the economy has also
got affected. Limiting the oil production has been determined by the OPEC due to decrease in
the demand during the covid-19 situation. Due of profit of the business got affected in the
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market. High production and less demand can affect the financial stability of the business in the
market which can also affect in the growth of the business. Covid-19 has affected the businesses
of economy due to which growth of the economy has also got impacted. It also created
unemployment in the economy by providing the restriction on the business due to employment
rate has also been decreased. Due to Covid-19 supply and demand of the goods and services are
also been restricted due to which revenue generating structure of the business has got affected.
As shown in the graph below Oil and gas authority of UK also believes that production of oil and
gas will again go through the decline phase after the slight increase which can affect the growth
of the oil and gas industry. If the production of the business will continue to decline in the
coming years it affect the long survival of the business in the market (Beynon-Davies, 2020).
CONCLUSION
As per the report it has been observed that Contemporary business environment effects
the growth of the business in the market due to the situation of Covid-19 prices of the crude oil
has been decreased by the fall in the demand which affected the profit of the business and OPEC
has also announced the reduction in the production process of crude oil due to the development
of the vaccine there are chances of increase in the demand of the crude oil because people are
using their transportation facilities for their job purpose. Due to which demand of the crude oil
will be increased in the market and profit of the business will also increased. Covid-19 has
affected the many business of the economy due to which growth of the economy can also
affected due to fall the overall revenue of the economy. As per the research chances of recovery
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are there which will the financial of the economy. Due to the impact of pandemic UK has faced
huge loss in the economy which affected the GDP of the UK economy but government gas taken
various actions to improve the financial scale of the economy so that development of the
economy can take place effectively. Various actions taken by the government helps in improving
the condition of the business due to which employment rate will also be increased which will
increase the productivity in the economy. Due to Covid-19 employment rate has been decreased
and unemployment has been increased. Due to which many needs of the economy cannot be
fulfilled properly. Oil and gas industries provides various benefits to the economy which helps in
the satisfying the basic needs of the economy of the economy.
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