International Business Environment and Strategy

Résumé du document

"You have been asked by a major oil company to analyze the likely developments in the oil market over the next five years. Carefully explain the theoretical underpinnings to any predictions you make. How might your predictions influence the future strategic direction of the oil company? Explain your reasoning" The process of industrialization and the subsequent move to a post-industrialized economy that occurred worldwide for over a century, has guaranteed continual oil consumption growth (excluding rare periods following infamous oil shocks), due to the economies' structural dependence upon this energy source for the production of electricity, as an industrial input and as fuel for transport. Since 1971, world oil consumption has rise from 2.3 million tons annually to 3.8 million today. This inevitably leads us to wonder whether oil supply can keep up with demand, or rather, will growth in demand for oil decrease as nations seek to diversify their energy requirements in a tighter global market.

Extraits

[...] Much of the growth in oil consumption is projected for nations of Non-OECD Asia, where strong economic growth is expected. To compensate for this growth, OPEC has had to increase production. Since most non-OPEC nations' oil sectors are controlled by private companies who rarely refrain from profitable production, the short-term bonus of catering to higher demand lies squarely on OPEC and the spare production capacity it maintains. However, as of January 2006, the Energy Information Administration estimates that all OPEC nations are producing at maximum capacity, except Saudi Arabia which has some 1.1 - 1.6 mbpd of surplus capacity. [...]

[...] Unpredicted technological progress in any one of the domains listed above has the potential to considerably reduce demand for oil. This possibility is all the more likely in the long run. It is only in the long term that a lack of demand appears capable of inhibiting oil consumption growth, but, ironically enough, this will be indirectly due to a possible lack of supply. The latter will probably not be caused by an actual shortage in output but rather by oil's intrinsic exhaustibility. [...]

[...] International Business Environment and Strategy 1. You have been asked by a major oil company to analyse the likely developments in the oil market over the next five years. Carefully explain the theoretical underpinnings to any predictions you make. How might your predictions influence the future strategic direction of the oil company? Explain your reasoning. The process of industrialization and the subsequent move to a post- industrialized economy that have occurred worldwide for over a century has guaranteed continual oil consumption growth (excluding rare periods following infamous oil shocks), due to economies' structural dependence upon this energy source for the production of electricity, as an industrial input and as fuel for transport. [...]

[...] In electricity generation, natural gas is increasingly becoming the energy source of choice. In addition, coal is set to be reborn—if in fact it did thanks to its abundance and geographical dispersion, necessity and less polluting technology advances; as is nuclear energy. Also, renewable and non-conventional oil (such as ethane) appear to finally be feasible on a large scale and are often able to secure government subsidies. In the transport sector, an effect similar to that following the 1973 OPEC oil embargo may be in the cards. [...]

[...] The main contenders for the very long term in fact are considered so because exhaustibility is not one of their features. These are the renewable energy sources such as wind which is already making inroads in select countries like Germany. Already some countries have made it official government policy to be oil-free. Sweden has set 2020 as a target for independence from fossil fuels and Iceland is intent on becoming the world's first ‘hydrogen economy' by 2050. Will the world run out of oil? [...]