MARKETS AND STRATEGIC DECISIONS

Markets and Strategic Decisions



1. The Oil Industry

Demand and Supply over the last 5 years

To note, the oil industry has been labelled as one of the most important sources of energy and the future of all technological advancement and industrializations. This is because the accounts of industrialization which has coiled the world in its web, boundary-less organizations and constant and iterated requirements posed by the increasing population around the world are some of the most important factors that have been associated and responsible for the purpose and objective of this never-ending boom of the oil industry. Not only this, countries and nations now work independently and in alliances for the purpose and objective of exploiting this valuable resource and utilize it to their own country-wide development and progress. The growth for crude oil demand this year is running at its fastest pace in 24 years. The surge in demand can be attributed to an increase in consumption triggered by the US economic recovery and China's economic boom. The sharp increase in both demand and price has encouraged new oil exploration and investment. Companies want to reduce their exposure to Saudi Arabia and the whole Middle Eastern area due to the extreme instability in the region.

In order to understand the dynamics of supply and demand, the oil industry is one of the most important and prominent industries. The dynamics involved in the oil industry are rather complex and confusing at the same time. This is because of the fact that the demand and supply, especially in the short-term, is highly elastic. No matter where you are, petrol is the only source upon which your car with run on. In winters, you need heated oil and generator oil to heat your house and that giant airplanes, airbuses and air travellers will not move to different source of energy in order to maintain their performance or for their propulsion. In other words, a large change in price only has a small impact on demand.

The forecasts of the future trends in crude oil production and exports are divided into two: an optimistic forecast that crude oil export will increase along with the increase in crude oil production, and a pessimistic forecast that the increase in crude oil export will be stopped by the suspended increase in crude oil production. Factors that will affect crude oil production and crude oil export in the future are the crude oil price, the export capacity of pipelines and ports, and the restrictions to be imposed by the Russian government on oil companies.

After several years of big gains in production, many of the Russian companies that have seen the largest increases are reporting slowing growth, while those that have lagged behind aren't picking up the slack. Government officials and analysts say Russian companies haven't invested enough in bringing new fields into production, raising questions about whether improvements at existing fields will be enough to sustain growth. Substantially higher levels of capital spending are required for ...