(PDF) What Next for the Oil and Gas Industry?
Added on 2019-12-03
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Oil and Gas Retailing in UK
The consumption of oil and gas is considered important for sustaining economic growthin this globalised and industrialized world. This sector provides wide range of chemicals andenergy that are further vital for other industries, transport and households. The government alsoearns substantial export revenue and tax that inturn supports economy. Through this sector, morethan 380,000 people get employment in UK (UK government Oil and Gas Sector strategy, 2012).However, the recent global recessions has reduced the demand of oil causing the rise in itsprices. Furthermore, the environmental and the climatic changes have also constrained thegrowth and profitability of various industry players including retailers. The central aim of thisreport is to study the complex environmental factors that influence the oil and gas sector in UKand how these factors can affect development in oil and gas retailing. UK is the world’s largest producer of natural gas and petrol in European Union and as perthe report of BP Statistical Energy Survey, 2008; UK constitutes 0.29% of whole world’s oilreserve which is more than any other member country of EU. Moreover, it is one of the largestexporters of crude oil and main importers being US, Germany, Netherlands and France. In UK,large oil producers include BP, Shell, Total and ChevronTexaco. Production from oil and gasfields reached the peak in late 1990s, but gradually it declined over the past years (Oil and Gas inUnited Kingdom- Overview, 2013). Petroleum has also been produced in UK for centuries. Atpresent, there are over 240 offshore fields for petroleum production. Large numbers of factorsare there that affect the current oil and gas industry environment and thus influence theoperations of retailers in the industry. Some of the significant factors comprises of Economy,technology and politics. These factors are as discussed below: Political factors: Oil and gas is the most required commodity worldwide and any fluctuation intheir prices greatly influences the economies of the nations. Volatility in the prices has not onlyaffected the common people, but many companies had also been droven away. For this reason,prices are regularly monitored by various economists (Moffett and Inkpen, 2011). Politicalfactors refer to the degree to which government interferes in the economy and thus in overallindustrial sector. These factors include labor law, tax policy, trade restrictions, fiscal andmonetary policy, tariffs as well the environmental law. All these factors have a great impact onvarious operation of the sector. Tax policies of the government have a huge impact on operationsof the retail organizations. Due to increase in taxes, they have reduced their investment on plantsand even encouraged the speculative activities by the retailer. Decisions made by the
governmental bodies also directly or indirectly affect the oil and gas industry operations. Forinstance, the sector has major effect on climatic changes, due to which the UK government hastightened the law on decommissioning. It has also formulated various policies and laws thatdirected companies to produce energy for the economy while reducing the amount of emissionand utilizing new energy option. The government has also introduced carbon tax charges in orderto reduce the greenhouse gas emission generated by industry. Moreover, it has also levied severaltaxes on energy which inturn compelled the industry to look at new renewable energy options(Wils and Neilson, 2007). Apart from that, the government has adequate control over the oilprices, at the time of global high prices, it lower the prices of oil inturn creating financialproblems for the fuel retailers that further lead to supply shortage. Presently, the oil companiesare reaping huge benefits in terms of rise in energy prices etc., but certain environmental lawsand policies have made difficult for them to sustain in long term. The production and explorationsegment of industry is continuously affected by the regulations governing the production of oiland gas, royalties and taxation policies of government which inturn has increased their overallcost of production further leading to increase in prices for ultimate consumers (Moffett andInkpen, 2011). Even the refining and retail segment is also subject to various laws which includeregulation on underground storage of oil or gas, cleaner gasoline, reducing refinery emissionsetc. Deregulation of certain restrictions as on one hand has enabled the business enterprises toacquire or merge with other companies, but this has also obliged companies to review orreconstruct their operations and establish cleaner fuels Apart from that, most of the oil reservesare controlled by government owned enterprises in many nations. Thus, it can be said that oil andgas industry is highly governed by the political bodies intervention (Vactor, 2010)..Economical factor: Oil and gas sector both affect the nation’s economy as well as affect by theeconomy greatly. It has a complex relationship with the nation’s economy. As on one handeconomic prosperity or growth lead to the increase in demand for oil and gas by both householdsas well as the industrial consumers (The economic impacts of the oil and natural gas industry onthe US economy: Employment, Labor income and value added, 2009). These rises in demandcomes from the energy and dependent sectors such as commercial sector, agriculture,transportation, residential and the industrial sector of the economy. The rise in demand may alsopose economic unrest. While on the other hand, economic downturn also greatly affects thedemand for such oil and gas commodities. The usage of oil and gas products is increasingly
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