Development in Oil and Gas Retail Industry - Case Study Example

Running Head: Development in Oil and Gas Retail Industry. Student’s name Institution Course Professor Date Introduction The oil and gas production and consumption has been known to be crucial in the sustenance of economic growth in the industrialized world. The oil and gas industries have contends with huge amount of uncertainty and risk thus making the organizations concern to focus on the future with a view to succeed in both financial and operational perspectives. The energy industries must have lead times for new projects even in the face of struggling current global economy. Oil and gas industry is a vital link in the national energy supply and contribute to the general economy (John, 1998). Deptford is located in Northern Gloucester County, New Jersey being founded in 1693. It has a thriving business community with state of the art youth facilities and numerous parks. It is one of the oldest settlements in Lewisham, the town is well known at the location of the historic Royal Dockyard whose establishment indeed brought fame and prosperity to Deptford for many centuries. The investment in the North Sea and gas industry has been at its highest for over the last 30 years. According to the Oil and Gas UK 2013 activity survey, it showed that there was £11.4 billion investments in the UK’s oil and gas sector in 2012 (Purvin and Gertz, 2008). Furthermore, the Oil & Gas UK has projected much prospects of large scale investments which will highlight the potential for the UK’s offshore oil and gas sector to boast the economic activity and at the same time contribute to the country’s prosperity in the future times. The oil and gas industry in UK had suffered from tax uncertainty and corresponding low investments, but nonetheless, the UK continental shelf has now benefited from the record investment in new development and utilization of existing infrastructure and assets. The oil and gas retail industries in Deptford in London have benefited a lot in the recent introduction of targeted tax allowances that could promote the development of difficult projects. The government have had ground breaking commitment and support that provided certainty on decomposing tax relief. Due to these, both independent businesses and global companies were prompted to take another look at the United Kingdom as the most preferred destination thus lead to a new wave of investment (Purvin and Gertz, 2008). The oil and gas industry has been known to contribute to industrial capacity and skills base and immense strength as an exporter thus the growth of the country’s economy. The government has placed much commitment towards making a great place for energy firms to carry out business and developing new technologies for the oil and gas industries. The oil firm BP has collaborated with higher education institutions with a view to boast the status of the UK as a driver of innovation at oil and gas sector. This has made the firm to be a more competitive position by finding new and more efficient means of using and generating power (Noreng, 1980). There was construction of natural gas-fired, combined cycle electric generating facility in West Deptford being financed by West Deptford Energy Holdings. It was deemed to add a clean and cost efficient power generation resource in the region. For instance reduce the energy costs and protect our natural environment through eliminating the need for power from coal states. Determinant impact supply and demand has on the oil and gas industry in the local area An increase in the human population corresponds to an increase in the demand for oil and gas products. The oil and gas industry is the key to progress especially to all nations striving to attain prosperity. A sizeable energy efficiency improvement, the demand for growth becomes less great. However, as the demand increases for both the oil and gas, the existing production will decline. The local retail petrol station in Deptford normally weigh the risks versus the benefits of new projects, new products and the amount of capital to invest. The regulatory, safety and environmental concerns impacts on the supply and demand for oil and gas in the local area. Technology is the fundamental force to increase the supply of oil and gas and also mitigate the environmental impact of energy production and consumption. There is need to develop and integrate both the information technologies and production with a view to recover the existing fields as well as explore new hydro carbon sources (Purvin and Gertz, 2008). In addition, there is need to enter a challenging operational frontiers as well as reducing the environmental footprint. Oil and gas production has been known to be technology-pervasive industry thus requires heavy investments. Advancement in technology is crucial in providing an abundant supply of oil and gas. However most of the players in the oil and gas industry have fallen short in utilizing these new technologies. Technological advances in exploration has been coupled by technology advances in the development. Increase in supplies in the recent decades have been witnessed due to new discoveries in Africa and also vigorous exploration and production in other parts of the globe. Government involvement into the oil and gas industry influences the supply side (Purvin and Gertz, 2008). For instance, support of national economic growth, stricter operational rules, and unrelated carbon regulations. When compared with oil, the demand for gas is rising at a faster rate due to being a fuel for clean and efficient electric power. In the periods of fluctuating and generally higher prices, the demand for oil and gas has been increasing with decreasing discovery volumes. There is need to ensure that both the new and discovered resources are produced in an environmentally sound and economic way that is able to increase the demand and also offset the natural field decline. Different factors that affects demand and supply in oil and gas development They are various factors that affects demand and supply of oil and gas development in Deptford, South East of London. The retail outlets of oil and gas noted were the Shell UK, Esso, Tesco filling station and Sainsbury’s filling station. The supply of oil and gas within these retail outlets were influenced an increase in cost of operation, poor implementation of corporate strategy, shortage of rigs, equipment and personnel, operational hazards, non –attractive to qualified personnel and overreliance upon third party transportation. The external factors that deemed to influence the supply of oil and gas were the government involvement and natural disasters (Jahn, Cook, Graham, 2008). Their operation cost have been high in terms of meeting all the regulatory requirements, laying the ground for business as well as putting forward enough capital to start off this and sustain it. These regulations demanded that all acceptable environmental standards be complied with and that the operations of the retail outlet were restricted to certain parts for better land use. In addition, Credit/financial risks involved by retail outlets influence how the partners engaged their money in the business. Whenever customers, vendors or suppliers foresee a risk either from government changes in regulation or natural causes they tried to minimize the risk by checking on the stock or they hold their money so that they do not lose a lot. Natural calamities however are most properly unforeseeable. Natural disasters and unbearable weather conditions called on the retail outlet owners to adjust (Purvin and Gertz, 2008). In such cases as heavy rains which may lead to destruction of pump line supply will be highly affected since will have to rely on road or railway to get such commodity. Sometime the storage facilities are vandalized by such conditions hence the market will rely on the unaffected facility. Operational hazards such as oil spills and personal injury influenced the retail outlets on their ability to avail oil in the market. The impacts of climate change and greenhouse gas legislation affected the supply and demand for oil and gas. This legislation strived to put check on the amount of gas that should be emitted by these operations plus the consumers. This measure was also imposed to consumers in form of rates and royalties will regulate their use of this product hence regulating supply. There is a general increase in population in the region hence oil consumption. This increase came with also high population that has been able to buy cars and hence need to fuel them for their use. The outlets had to ensure they meet the needs of such clients. These populations keep on moving and have to commute to different part of London or even across the country hence increase in demand for this product. Government regulation and legislation have also been at the center of shaping the demand curve oil products. There are some set standards that are limiting the use of oil product. Some of the environmental legislation are so taxing to the consumer e.g. when they have part with some amount as an account for the pollution or greenhouse gas emitted to the environment then it mean check to the amount they demand. In some cases especially with speculation in the market the outlet limit the demand by individual at one point. Situations have risen where the government has to step in ensuring that no one can just buy these products and store them in their homes. This measure is meant as a caution to the citizens against the hazards they face but at the same time help in checking amount to be demanded at one time (Purvin and Gertz, 2008). Demonstrate the essential awareness need in oil and gas retail industry The success in the future of oil and gas entails a continued adaptation of a complex business model to unforeseen circumstances. The energy companies are currently trying to balance the need to supply the world with hydrocarbons while engaging in alternative energy sources such as biofuels, renewable energy sources and unconventional sources. The demand for both oil and gas is expected to increase due to continued increase in exploration success and production as other additional areas are opened for exploration (Purvin and Gertz, 2008). Potential factors that could impact (limitations or enhance) its future development The advancement of new technology can allow the oil and gas industry to produce oil and gas from unconventional reservoirs such as oil shale, oceans seams, and heavy oils in an environmentally accepted way. Another major factor is the concern about environment. For instance the carbon dioxide sequestration will and environmentally feasible operations forms part of developing the new resources. Technology breakthrough in nuclear power, solar energy and biofuels will alter the demand for energy from the hydrocarbons. With the numerous regulations surrounding the oil and gas industry being relaxed, the pressure for squeezing the supply and demand for the petroleum products will be ease (Purvin and Gertz, 2008). However, if quality regulation as an air pollution control strategy is enforced then the product quality will vary and thus could hamper the free trade. Competition from alternative sources of energy can influence the future development of oil and gas industries. Although it is hard find a perfect substitute of oil, customers have been force to put into use some other sources of energy e.g. electricity for cooking and lighting. People have avoided the use of facilities that demanded the use of oil such as the use of public transport rather than personal car. This is mainly due to duties and rates attached to this petroleum product. As earlier noted, we have not found a perfect substitute but the small fraction brought by changes in use and introduction of new means and way of operation (Moffett, 2011). Political environment have had an impact on the future development of the oil and gas industry. Every time there is election in the country people expect changes in some policies which can favor them or favor the industry depending on the expectation, consumers will be speculating as they await the new government. Oils import faces international challenges when it comes to outside politics. This affects the oil market in general (Babusiaux, 2007) Demand will also be speculating on such international outcomes. Information in the industry indicate that most of the key issues affecting this industry are instigated by factors ranging from political, environmental concerns, economic (rates, taxation and market patterns), social, legal regulations and technological advancements. These are factors within the capacity of a stable economy and therefore need to formulate policies that can strive to stabilize the industry. To deal with some of these challenges there is need to put checks to the free flowing economy. This means large companies could be compelled to supply retailers till the end of the supply agreement to avoid shortage in the market (Moffett, 2011). Price wars should be controlled and that local authority be fair to the local market by offering progressive rates and retailers should be free to set pump prices. Despite introduction of security of tenure policy in the industry there is need to have a respectful code of practice. There are many barriers to entry to such markets. This range from regulatory (both governmental and environmental), duties and royalty and high initial capital required (Purvin & Gertz, 2008). There are also some standard set out by the wholesaler in the market that make it hard for the new players to compete in the market. This includes the commissioning and discount and also the rates when it comes to new outlets. This therefore means that the market remain dominated by the initial supplier hence limitation in supply. Conclusion Deptford is located in Northern Gloucester County, New Jersey being founded in 1693. It has a thriving business community with state of the art youth facilities and numerous parks. It is one of the oldest settlements in Lewisham, the town is well known at the location of the historic Royal Dockyard whose establishment indeed brought fame and prosperity to Deptford for many centuries. According to the Oil and Gas UK 2013 activity survey, it showed that there was £ 11.4 billion investments in the UK’s oil and gas sector in 2012. Furthermore, the Oil & Gas UK has projected much prospects of large scale investments which will highlight the potential for the UK’s offshore oil and gas sector to boast the economic activity and at the same time contribute to the country’s prosperity in the future times. The oil and gas industry has been known to contribute to industrial capacity and skills base and immense strength as an exporter thus the growth of the country’s economy. The government has placed much commitment towards making a great place for energy firms to carry out business and developing new technologies for the oil and gas industries. An increase in the human population corresponds to an increase in the demand for oil and gas products. The regulatory, safety and environmental concerns impacts on the supply and demand for oil and gas in the local area. Technology is the fundamental force to increase the supply of oil and gas and also mitigate the environmental impact of energy production and consumption. The success in the future of oil and gas entails a continued adaptation of a complex business model to unforeseen circumstances. The energy companies are currently trying to balance the need to supply the world with hydrocarbons while engaging in alternative energy sources such as biofuels, renewable energy sources and unconventional sources. The demand for both oil and gas is expected to increase due to continued increase in exploration success and production as other additional areas are opened for exploration. Being the chief energy sources, oil and gas, there is need to increase the supply due to increased demand. Therefore, the oil and gas industry will have to invest heavily on the exploitation of both the conventional and non-conventional reservoirs of both oil and gas in economically and environmentally accepted manner. References Denis Babusiaux, 2007. Oil and Gas Exploration: Reserves, costs, Contracts, illustrated, TECHNIP Frank Jahn, Mark Cook, Mark Graham, 2008. Hydrocarbon Exploration & production, Vol 55 of Developments in petroleum, Elsevier. John S. B.1998.Competition in the supply of Petrol in the UK office of Fair trading Michael H. Moffett, 2011. Global Oil and Gas Industry, PennWell Books Oystein Noreng, 1980.The Oil Industry and Government Strategy in the North Sea, Taylor &Francis Pennwell Publishing Company, Pennwell Corporation, 2006. Oil and Gas Journal Databook, PennWell Corporation. Purvin and Gertz, I.2008.Study on Oil refining and Oil markets, European Commission Read More