Competitive warfare The impact of electric cars on the oil & refinery industry and their countermeasures
Business risks for oil and gas companies
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Business risks for oil and gas companiesI  n the following, we summarize the various market risks the oil and gas industry is facing. We concentrate on selected risks, particularly on competition from new technologies as e.g. from electronic vehicles.
Figure 4: Ernst & Young Business Risk Radar 2009 Source: Ernst & Young, Business Risk Report Oil and Gas, 2009 Access to reserves: Access to reserves is currently seen as the top risk for the oil and gas industry. The increase of oil prices in 2008 gave political interference a great push, resulting in power shifting to the owners of resources. Companies are menaced by resource nationalism, increasing declaration of land areas as environmentally sensitive and concerns about energy safety. [The disastrous oil spill in the Golf of Mexico, caused by BP’s off shore oil rig Deepwater Horizon, will very likely spark initiatives for further regulations, thus exacerbating the situation for oil and gas companies.] Uncertain energy policy: The economic crisis of 2009 caused a high volatility in commodity prices. In addition to a quite volatile energy policy, goals of security of supply, climate change considerations and affordability, make a clear prediction of future policies near to impossible. Climate and environmental concerns: The earlier environmental concerns are dealt with, the more likely it becomes that a company deals with these concerns successfully, but it also might turn out as a strategic advantage in the future. “The public is acutely aware of the potential hazardous environmental effects that oil and gas companies’ operations can have. Today, there is a “zero tolerance for environmental accidents,” […]” New operational challenges: As oil and gas companies are operating in new locations and unfamiliar environments, experienced employees and new high-tech equipment becomes vital to their businesses. Drilling in the Artic or the frozen Tundra involves dealing with different daylight hours and of course the cold. [In Canada and Venezuela, just to mention two countries, oil is produced from oil sands. Although the amount of oil sands is huge, the price of production is multiple compared to free flowing crude oil.] Competition from new technologies: Two major aspects can be identified. The first is the risk of competitors taking over leadership in new technologies and the second is new technologies altering consumer habits and preferences. The risk is “not participating in the discovery and development of the new energy future,” […]. Risk N° 1 and N° 2, as stated above, can be confirmed by the following quotes of US President Barack Obama’s speech at Carnegie Mellon University, Pittsburgh, PA. “[…] We also have to acknowledge that an America run solely on fossil fuels should not be the vision we have for our children and our grandchildren. […] We consume more than 20 percent of the world’s oil, but have less than 2 percent of the world’s oil reserves. So without a major change in our energy policy, our dependence on oil means that we will continue to send billions of dollars of our hard-earned wealth to other countries every month -- including countries in dangerous and unstable regions. […] It will continue to put our economy and our environment at risk. […] The time has come to aggressively accelerate that transition. […] Now, that means continuing our unprecedented effort to make everything from our homes and businesses to our cars and trucks more energy-efficient. It means tapping into our natural gas reserves, and moving ahead with our plan to expand our nation’s fleet of nuclear power plants. It means rolling back billions of dollars of tax breaks to oil companies so we can prioritize investments in clean energy research and development” (The White House, 2010). Especially the last sentence is of great impact to the oil and gas producing companies in the US. It might initiate a redistribution of state support away from the traditional energy business towards renewable, green energy. This, very likely, has the potential of igniting a severe lobbying rally against renewable energy, EVs, “tree huggers” and also the President himself. Admittedly, the public acceptance of such measures is very likely much smaller than it would have been a couple of months ago, before the catastrophic oil spill in the Gulf of Mexico. President Obama’s approach is supported by the horrifying situation on the Louisiana coast line and the effects on the local economy. Download 0.64 Mb. Share with your friends:
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