Impact Of Emerging Themes On Oil And Gas Sector

1. Critically evaluate the case study, outlining the ways in which the identified relevant emerging themes might impact on the current business strategies relating to the identified organisation or sector (Oil and Gas).

Your critical discussion should include a critical analysis of the ways in which those themes might affect the appropriateness of existing organisational policies and practices

Areas of focus can include any combination of the following

1. Political environments
2. Technological advancements
3. Demographic changes
4. Social trends and shifts
5. Industry globalisation
6. Legal transformations  
7. Global economic issues

2. Critically evaluate how those themes identified could affect the operational and/or strategic decision-making necessary to shape organisations within the broad sector over the next five years. Your answer should use contemporary examples of how those emerging themes have started to be addressed within your business sector.

3. Provide justified recommendations for courses of actions that organisations within the broad sector can take to ensure that they are able to manage the effects of those emerging themes effectively.

Impact on the current business strategies 

There are number of diverse impacts being identified from the emerging themes. These impacts are can be further classified in number of external factors. The following sections will discuss the impacts on the oil and gas sector from different perspectives.

Political factors 

OPEC countries are the major producers of oil and gas and they constitute the major portion of supply across the world. Due to the ever-increasing growth of demand of oil and gas just a few years ago, OPEC countries started to store their reserves rather than producing with having the impression that future price of oil and gas will be more compared to now (Adetutu 2014). However, the recent trend of shifting from traditional oil and gas to more sustainable sources of energy lead to the decrease in price (Russell 2013). Thus, the current business strategies of the players in the oil and gas sector should be changed. Their current business strategy of less producing in order to increase the price will be boomeranged.

In addition, introduction of the regulations and standards related to the pollution and carbon emission from the use of oil and gas also having adverse impact on the industry. According to the reports, UNFCCC COP21 meeting concluded that efforts should be initiated in order to reduce the rate of emission of greenhouse gas and impact of climate change (Creti, Ftiti and Guesmi 2014). This is also having the adverse impact on the industries in the oil and gas sector. This is due to the reason that efforts in reducing the greenhouse gases and carbon emission will lead to reduction in the use of oil and gas (Russell 2013). Thus, the current organizational strategies and policies of less producing the petroleum products will not be viable (Shuen, Feiler and Teece 2014). This is due to the reason that in the long term, the price of the oil and gas may be decreased due to the reduction in the price.

Technological advancements 

Currently, the trend related to the technological advancement of the oil and gas sector is more stagnant. This is due to the reason that ill the last decade, there were no sustainable and effective alternatives available in the market (Brown and Yucel 2013). Thus, the oil and gas sector was having the monopoly holding in the energy industry. This leads to the minimal development of the technology in this sector and continuity of the same level of production and efficiency (Ftiti et al. 2016). However, in the recent time, trend in the energy industry was drastically changed with the initiation of innovation and technologies. Currently, there are number of alternative and sustainable resources being available that is further reducing the market potentiality of the oil and gas sector. Thus, the current organizational strategies of the oil and gas sector will not be effective enough and their existing strategies will not generate revenue anymore (Al Yousef 2013).

Technological Advancements

Social trends and shifts

Change in the social trend is the major emerging theme for the oil and gas sector. This is due to the reason that change in the social trend is directly related to the change in the market demand, requirement and expectations. One of the major social changes being identified is the increase in the preferences for the environmental protection (Creti, Ftiti and Guesmi 2014). According to the reports, average population in the current time are more aware about the degradation of the environment by means of pollution (Kang 2015). Thus, this is also leading the social trend towards the initiation of reduction of use of petroleum products. According to the reports, there are number of regulations being initiated in order to reduce the use of the petroleum products such as rules stated in the Paris agreement. This is also encouraging the people to be more concerned about use of the oil and gas.

On the other hand, it is also reported that oil and gas sector is having negative impression and negative word of mouth. This is due to the reason that industries in the oil and gas sector are accused of lobbying against the climate protection pacts and they are known for maximum contribution of carbon in the atmosphere. This is also leading to the origination of negative image in the society (Kang 2015). Thus, the current organizational strategies and practices will be more effective in the long term due to the reason that there are number of option available to the people in terms of their energy consumption. If the oil and gas sector is still having the same approach, then the customer attrition rate will be more towards more alternative sources of energy (Omeje 2017).

Industry globalization 

In the current era of globalization, transfer of technology is much easier than it was a decade ago. This is due to the reason that initiation of the globalization lead to the reduction in distance among the countries. Thus, in terms of the oil and gas sector, it is also having adverse impact. This is due to the reason that in the past, alternative technologies are being initiated and innovated in certain regions and they are limited within that region only (Govindan, Kannan and Shankar 2014). However, in the current time, globalization is helping in expanding these technologies across the world. In the given report, it is stated that the technology of extraction of energy from shale was first initiated in the United States. However, due to the concept of globalization, this technology covered global market and posing a serious threat for the oil and gas sector (Brown and Yucel 2013).

Social Trends and Shifts

For instance, Tesla electric car was founded in the United States. However, with the help of the globalization, they are having their presence in number of countries around the world. It should be noted that Tesla cars run on electric batteries and they are direct competitors to the cars running on traditional fuels (Yusuf et al. 2014). It can be concluded that globalization lead to the increased popularity of the electric cars around the world and it is encouraging more people to opt for the electric cars such as Tesla. Thus, in this case, the existing approach of the oil and gas sector that oil and gas will be the only source of transportation is not viable in the current time (Yusuf et al. 2014). It will affect the current organizational approach of the oil and gas sector.

Global economic issues

In the current time, price of the oil and gas is rapidly increasing due to the increase in demand with having limited rate of production. Thus, the more will be the price of the fuel, the more will be the tendency of the customers to get attracted towards the alternative sources of fuel (Brown and Yucel 2013). It is also to be noted that the current organizational policy of the oil and gas sector to produce in limited manner further accelerating the price of the oil and gas products (Govindan, Kannan and Shankar 2014). On the other hand, alternate sources of fuel are constantly witnessing the drop in their price because of development in technology such as initiation of Lithium Ion batteries. In the given report, it is also being stated that initiation of the carbon tax is further increasing the price of the petroleum products. Thus, according to the basic law of economics, people will get attracted towards the lower cost alternatives, which is the case of reduction of popularity for the conventional sources of energy (Pongthanaisawan and Sorapipatana 2013). For instance, maintenance cost of electric vehicle is less than gasoline charged vehicles.  Thus, current organizational strategy of the oil and gas sector will be highly affected by this economic issue.

Possible issues

Sustainability

Sustainability is considered to be a major concern for the upcoming five years of the Oil and gas industries around the world. Environmental degradation is one of the principle factors in this regard. It can be argued that since the indiscriminate use of natural resources in terms of oil and gas, the planet has been going on the verge of an apocalypse. Issues like the global warming, soil erosion, pollution and ecological imbalances are the main facets of facilitating robust use of oil and gas. According to the government report of Norway, due to rapid use of oil and gas, there is an amount of 26% greenhouse gas released in the air (Omeje 2017). During the survey of 2012, it was calculated that approximately 12.4 million tons of greenhouse gas is released annually in Norway (Ahmad et al. 2017). As a result of that the use of oil and gas becomes reduced to an emphatic level. As a matter of fact, keeping in mind about the adverse impact of oil and gas on environment the International Energy Agency (IEA) and the Energy Information Administration (EIA) of the US Department of Energy has started figure out the possible ways to reduce the future oil production (Höök 2014).

Industry Globalization

Problems in operation outside US

In case of the oil and gas sector, lack of adaptability causes a serious threat to the market expansion globally. It can be argued that the impact of globalisation may be touched the market advancement strategies of oil and gas sector but the age old practices remains the same even after the advent of technological modernisation. According to Wan, Huang and Craig (2014) one of the biggest oil and gas company Shale is facing series of problems in their business operations in China. The main reason is lack of technological advancement that is restricted in US only. In fact, in compare to other regions, Shale is quite successfully operating its business in US because of their technological advancement. In this context, the horizontal drilling techniques and the hydraulic fracturing of underground rock system become the de facto key to the business operation of Shale in United States that helps them to flourish inside the country in a rapid pace (Kilian 2016). However, in China the Shale enterprise failed to develop such unique mechanism by incorporating new technologies. As a result of that uncertainty circles around the business prospect for the Company in China and this uneven technological adaptation can be seen all over the world.

Damages in market expansion

It can be argued that the oil and gas industry gradually loses its permanence or capitalisation in the global market. There are plenty of factors responsible for this escalating threat. The political and legal framework adopted by the countries for reducing environmental hazards caused by the oil and gas companies, international oil price fluctuation and the decrease of oil and gas are considered to be the major factors. The Reuters report revealed that due to the inhospitable situation in market expansion the oil companies start cutting down the numbers of the employees. For an instance, the Halliburton Company, associated with the oil service firm had reported to reduce the number of employees from more than 80,000 two years earlier to 50,000 at the end of the 2016 (Hampton and Williams 2017). Moreover, major European countries like UK (2040) and Germany (2030) have already announced to stop manufacturing gasoline and diesel vehicle and the initiative has been started into action (Yadigaroglu 2017). Furthermore, the recent survey on international oil and price demand has shown that the there are 6.6 million exports per day globally (Proedrou 2016). Therefore, despite of having a decrease in the market demand there is still some needs in the international market and the price hike leads to fluctuation in the operations of the oil and gas sector around the globe.

Global Economic Issues

Benefit of diversification

It can be argued that diversification is plays a major role in the sustainability of a business corporation. The more the company can diversify its products the more it will capitalise the market (Kirat 2015). However, due to the political pressure and legal proceedings the oil and gas industries face severe challenges in its market capitalisation and as a result of that fails to generate profit so that it can invest in new products. Moreover, new companies are putting more emphasis on the alternative as well as renewable energy resources. Renewable energies like solar, geothermal, wind and tide become very popular and appreciable to the customers that they are started looking to go for the renewable energies (Asdrubali et al. 2015). Therefore, it causes severe threat to diversify their production into a new mould. Threat of new entry and intense competition in the alternative energy sector make it a challenge for the big companies in oil and gas sector to adapt new technologies. It can cause serious threat to their marketing holding in near future.

Challenge in trusts

Due to immense presence in the world power media play a very significant role by exposing the nefarious secrets of the big business houses. In fact, the Oil and gas sector becomes a part of violating ethics in business. As a result of that the credibility and the brand image of those companies are came into the regular monitoring process through the international energy saving organizations and people and environmental organizations starts protesting against those big shots. For an example, in a report of Gallop poll in 2013 identified that the rank of oil and gas industry declines in such as pace that it shares the last place with tobacco industries all over the world (Stegen 2015). Moreover, it can be argued that despite of taking such measures for the beneficial of those companies, issues like controversial lobbying and law suits against climate changes put enormous negative impact on the condition of the oil and gas industry. Major events like the scandals of the leading oil and gas industry Petrobras and the Nigerian government came into limelight that condemned the idea of corrupt business practice that lead to the global destruction (Omeje 2017). As a result of that the Petrobras Company affected heavily and due to lack of public trust the organization failed not even to expand its market but also faced severe challenges in the existing business operations.

There are some recommendations that the existing big companies in Oil and Gas sector can and must implement in order to retain their business orientation around the world. Therefore, the recommendations are as follows,

• The Oil and gas companies must implement some measures to diversify their production. In fact, diversification resembles the idea of create alternative products in order to retain the marketing exposure in the oil and gas industry. As a matter of fact, the Oil and gas industries can produce renewable energies to retain their market operations in the world. However, it will be beneficial for the company not only to regain pace in the competitive market but also puts emphasis on the matter of sustainability as well.
• The next recommendation is related to the environmental aspect. It means, the organization should introduce some measures that are beneficial for the environmental sustainability. In this regard, the oil and gas industries affect the ecology heavily.  Therefore, the companies must put emphasis on developing mechanisms to reduce green house gases like CO2.  The Carbon Capture and Storage System will be a key mechanism that will be able to reduce the emission of CO2 generated from the use of oil and gas. This type of system will help the oil and gas company to maintain their operational process profoundly and as a result of that the future of the company will be secured.
• As a matter of fact, the role of the cost challenges is also a reason behind affecting the oil and gas industry. Market fluctuation is evident in the business operations of the country. However, the increasing trend will lead to problem in business. Therefore, the industries are always concerned about the market stability. However, in case of the oil and gas sector, this issue becomes more and more emphatic and the organizations are failed to curb it down. Therefore, it requires proper regulatory frameworks and initiatives from the ends of the companies in order to sustain in the market.
• Ethics and social responsibility plays a major role in this aspect. This trend has been popularized since the 1990s. In addition to this the growing popularity of the media and their acceptance paved the way for exposing the true facts about the organizational frameworks of the companies. In this regard, it becomes an important aspect for the companies to deal with the ethical standpoint and the social responsibilities in first place. In case of the oil and gas industries this problem poses a greater challenge and as a result of that it hampers the organizational operations of the sector. People are losing their faith from the organizations and it damages the brand image of respective oil and gas companies. Based on this understanding, the oil and gas companies must implement some measures to re-establish their losing heritage. Ethics and social responsibility can be identified as the key factors in the process and companies should emphasis on their concern about ethical standpoint.

Conclusion

It can be argued that the oil and gas sector across the world are facing serious challenges in order to expand their business. There are many factors in terms of political pressure, environmental issues, influence from the international organisations, technological backwardness and price fluctuation. As a result of that the oil and gas companies do not have a bright future in the next five years. The trusts and image that those companies are build long years aback, facing with the threat of extinction. It needs a diversification of products to manufacture more renewable energies as per the market demand and incorporating technologies that can reduce the emission of green house gases. Therefore, it can be concluded that the report dedicatedly manifest its concern regarding the future of the oil and gas sector globally and identify some key issues that those companies are facing or will be faced in the near future. In the end the report concluded the discussion with some recommendations that are beneficial for the survival of the oil and gas sector. Hence, it can be argued that the oil and gas industry is losing its trust and image but it is not impossible to reclaim the brand image through the way of eco-friendly set up and technological adaptations.

Oil and gas sector is the one of the most profitable business sectors in the world. They are also being considered as one of the largest business sector with having the requirement of huge investments. Thus, requirement of huge investments is also enhancing the business risk for this sector. Apart from being the most profitable sectors, oil and gas sector is also considered as lifeline of the modern day society (Shuen, Feiler and Teece 2014). This is due to the reason that oil and gas sector provides the major portion of the energy resources for the current generation. However, on the other hand, there are number of negative points also being associated with this sector. For instance, oil and gas sector is one of the major carbon emitting sources in the world and they are accused of lobbying against the global ruling regarding climate. In addition, the recent trend of shifting of main source of energy is also posing challenges for this sector to survive (Barker and Jones 2013).

In the recent time, there are number of emerging trends being identified that are relevant in the current scenario of oil and gas sector. These trends are having both opportunities and challenges for the business organizations operating in this sector. This is due to the reason that emerging trends are challenging the existing organizational practices and strategies; while on the other hand, this is also opening huge areas of business (Pongthanaisawan and Sorapipatana 2013). This report will discuss about the major emerging themes in the oil and gas sector. In addition, this report will also discuss about the impact of these themes on the existing organizational policies and practices. Moreover, the impact of these trends on the decision making process on the next five years will be analysed in this report. This report will conclude with number of recommended steps that will help to manage these trends effectively.

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