Evaluating Internal and External Business Environment

EVALUATING INTERNAL
AND EXTERNAL
BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Changed Crude Oil prices in UK from 2010-2020..................................................................3
2. Economic determinants of the changes in the Housing market........................................6
3. Impact of Government Action on UK markets from 2010-2020............................................8
4. Immediate and Future Effects of COVID-19 on Crude Oil Prices........................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Evaluation of Internal and External Environment of the business is mandatory as missing
any of the factor can impact the operation and function of the business greatly. Internal factors
are within the organization including its strengths and weaknesses and the external factors are
outside the organization like PESTLE factors, competitors etc. which impacts the overall
productivity and growth of the business.
UK Oil and Gas Industry faces a rapid growth since many years but since 2014, it faced a rapid
decline in the prices of the Crude oil which surprised the oil traders (Ahiaga-Dagbui and et.al.,
2017). The pandemic of COVID-19 added much in weakening this demand further. The report
will evaluate the Oil & Gas Industry of UK by discussing numerous topics. It will begin by
discussing the ways in which the prices of the crude oil changed from 2010-2020. It will further
discuss the economic determinants of all the changes discussed initially. The government actions
and its impact will be highlighted. It will be finalized by analysing the immediate and future
impact of COVID-19 pandemic on the Crude Oil Prices.
MAIN BODY
1. Changed Crude Oil prices in UK from 2010-2020
The sudden fall in the prices of the crude oil influenced the world economy in a greater way.
Especially, the UK economy was impacted by this unexpected and vast decline. Following are
the impacts:
 It happened in the mid-2014 which should increase the economic activities. The cost of
production of the companies who are totally dependent on oil products became very low
resulting in the increased investment and employment.
 Some sectors were impacted negatively including oil and gas extraction whereas some were
benefitted by it like agriculture, coke and refined petroleum, air transport as there is a fall in
the price of their inputs (Cordes and et.al., 2016).
 Some services like water transport will also be benefitted by this sudden decline.
 In this situation, UK has divided all these effects in 3 scenarios using CGE Model which will
evaluate the impacts when the reduction will be permanent, $50 per barrel settled, increase in
GDP of UK by 1% between 2015-2020 thereby increasing the employment around 1,20,000
in 2016.
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 When the fall is temporary, then the GDP is expected to increase from 0.2-0.5% and the
employment from 3,000 to 37,000 (Lorusso and Pieroni, 2018).
 There is an increase in the incomes of household therefore the consumer spending because of
the passing of the cost savings and increase in labour demand leading to more wages.
Impact on UK’s Position
Till 2014, the trade of oil was good but faced a rapid decline by mid-January 2015. The
main cause of this rapid decline was supply and demand side factors. When discussed about the
supply side, there was an increase in the output because of the increase in production by non-
OPEC producers and US shale oil production. On the other hand, the demand side was highly
impacted by the non-accelerating China’s pace and the economic recovery being very slow
(Nonejad, 2020). All the above mentioned factors contributed in the oil’s weakening demand.
The oil consumers were trying to take benefit from it as they can have the oil at least prices and
can sell later at higher prices when the demand will increase. The falling of Oil prices will be
supported by the technological advancements also because less investments are needed when the
extraction is done by using advanced technology than the labour.
Figure 1: UK net exports of crude oil and oil products
Source: Trends in Oil prices and the UK’s position, 2020
The above figure shows that UK being the net exporter of petroleum and natural gas, became the
importer of crude oil from 2005 and of oil products from 2013.
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