The Role of Scenario Planning in Exploring the Environment - Essay Example

Case study Scenario planning is an approach to understanding an s future in order to establish possibilities and to determine the organization’s ability to handle an emerging condition. It is therefore a strategy towards long term planning for an entity’s sustainability. In this paper, I construct two scenarios for the crude oil industry in the year 2020. Crude oil industry: Scenario planning for the year 2020Area of concernOil remains a major source of fuel, and even though alternative sources are being explored, there is a high probability that its application will continue in the global market.

It can also be used to supplement newly developed energy sources. Increasing pressure on the resource, and factors to its production however identifies concerns over trends in its future market. These lead to the question, ‘how will the crude oil industry affect our country’s economy and households’ livelihoods in the year 2020?’ Key uncertaintiesTrends in the crude oil industry identify many uncertainties, both short term and long term. Seasonal weather conditions that affect energy consumption levels in travelling and heating determines variable demand levels and prices of crude oil.

Adverse weather phenomena such as hurricanes also hamper production process to influence supply, and subsequently price of crude oil. Other factors that influence trends in the industry include resolutions by OPEC, production cost, and technological developments for the industry’s applications. Increasing demand for oil by emerging Asian economies such as China and India is another driver to the industry’s trend (Nrcan 2010). Similarly, increasing global demand for oil indicates future demand concerns (Opec 2012).

Critical uncertaintiesThe industry’s critical uncertainties are demand and adverse weather conditions. Demand has a high potential level because it dictates the industry’s quantity of production and influences prices at given supply capacities. It is however uncertain because of possible changes such as emergence of expanding economies and development of alternative sources of energy. Adverse weather conditions also dictate the ability to mine crude oil and are highly unpredictable, being natural conditions (Nrcan 2010; Opec 2012).

Developed scenariosDemand for crude oil identifies two extremes, high demand relative to supply and low demand relative to supply while weather conditions identifies existence of adverse weather conditions and favourable weather. The two factors generate four scenarios as shown bellow (Burt 2006). Favourable weather conditions Low demand High demand Unfavourable weather conditions Favourable scenarioA favourable condition will occur under high demand for crude oil and simultaneous favourable weather conditions.

This would mean an active economy that utilizes energy for production activities and household needs. Availability of oil due to good whether would also mean sufficient supply and consequently favourable prices. The scenario therefore indicates an optimally functional economy. Unfavourable scenario Unfavourable condition is however expected under adverse weather conditions and low demand for crude oil, especially without alternative sources of energy. Low demand would mean economic dormancy and consequences such as high unemployment rates, low household income, and a generally low demand for commodities.

Unfavourable weather conditions would also strain supply, and increase crude oil prices to force further industrial closures. Works citedBurt, G 2006, ‘The role of scenario planning in exploring the environment in view of the limitations of PEST and its diversity’, Int. Studies of Mgt & Org, vol. 36, No. 3, pp. 50- 76. Nrcan 2010, Review of issues affecting the price of crude oil, Natural Resources Canada, viewed February 9, 2013, < http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca.energy/files/pdf/eneene/pdf/pcopdp-eng.pdf>. Opec 2012, Monthly oil market report, Organization of the Petroleum Exporting Countries, viewed February 9, 2013, < http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_September_2012.pdf>.