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Oil Business - Advantages and Disadvantages - Essay Example

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The paper “Oil Business - Advantages and Disadvantages» reports the industry's resistance to market fluctuations, among the threats, there is its absolute dependence on raw materials, competition from alternative energy sources, the environmental movements protecting the planet from pollution etc…
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Oil Business - Advantages and Disadvantages
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Download file to see previous pages Typically, the entire oil business is divided into three main parts which are the upstream, midstream, and downstream sector. The upstream sector is concerned with the location and extraction of oil from various parts of the world while the midstream is concerned with the processing of extracted oil to marketable products as well as the transportation of such products. Both the upstream and the midstream sectors are concentrated only in certain parts of the world such as Russia or the Middle East while the distribution industry which is part of the downstream sector is spread throughout the world (Gary & Handwerk, 1994). Therefore, any changes in the global market of oil can either favorable or adversely affect the distribution industry significantly. The unpredictability of the global market can also lead to many changes inside of the distribution industry, and the rising cost of fuel has only put a strain on the already straining oil distribution industry.
One of the industry’s strengths is that it is among the first in the line of industries affected by oil prices and therefore it can suffer minimally as compared to other industries when it comes to changes in oil prices. Because it is the first hit by the changes, it is also the first that can adapt and the first to be able to quickly overcome the changes to try to lessen losses based on the change in oil prices. Where other industries are affected conversely through the chain of order and sometimes have little room to do anything about the price of oil, the gas distribution is hit first and therefore can adapt most quickly with the other industries adapting around it.
When less oil is mined and processed in the international market, independent distributors would have to compete to obtain what is available. This sort of competition can drive smaller distributors out of business. And for those smaller distributors, this can cause problems, and may at first look like an outright negative effect of gas prices, and a negative effect of the whole of the industry. But this negative opportunity for the smaller firms soon opens up a larger one for the bigger firms, which can then flex their economic muscle a little bit. It is this versatility and adaptability that helps the oil distribution industry to survive at hard times when most other industries would fold upon themselves and crumble. ...Download file to see next pagesRead More
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