Environmental Factors in the Oil and Gas Industries

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Environmental Factors in the Oil and Gas Industries Free Essay

Executive Summary

Oil and gas industries in the United States belong to the major industries that have experienced significant growth over the years. Almost all products that are used every day are made of either oil or gas. For example, gasoline, synthetic fabrics, plastics and many pharmaceuticals are made of oil. Over the years, the discussed industries have made a lot of improvements to maintain the production standards and also to control pollution. Moreover, these energy generation sectors provide employment to thousands of people. Therefore, the oil and gas industries in the US have a significant impact on the economy. Demand for the oil and gas products is continually increasing proportionally to the growth of population. The paper will analyze the external environmental factors in the oil and gas industries in the US and determine their influence on the production.

Environmental Factors in the Oil and Gas Industries

Demographic Factors

The first factor that affects this segment is the changes in population. The general population in the US has been on a constant rise over the years. This process affects the demand curve in any business. The analysis shows that when there is growth in population in a country, it has a direct effect on the demand for the oil and gas products. Therefore, population growth is directly proportional to the consumption of the fuel and gas products in the US. The chart below shows the difference in the historical trends and confirms the result.

The second factor in this segment is demographic characters. Demographics is a measurable aspect of the environment that is composed of both quantifiable and non-quantifiable elements. For example, it studies population behavior and changes in a nation gives. Since the early 90's, demographic numbers in the United States have continually grown. Demographic data shows that in 1960, the total population of the country was 180,671,000, and in 2015, US total population was 321,418,820 which demonstrates a big increase in population. The regression analysis confirms that indeed there exists a relationship between the population and oil and gas use. The F significant has a coefficient of 0.04562 which is less than 0.05. Therefore, the regression analysis is of statistical significance. The p-value is also less than 0.05 confirming that indeed there exists a relationship between the number of people living in a country and the oil and gas usage.

The correlation coefficient between energy use and the population is 0.273208. The analysis suggests that there is a weak positive correlation between the population growth over the years and the development of oil and gas industries.

Economic Factors

The first factor that affects the oil and gas industries is economic fluctuations. The state of economy of any country influences the whole process of production from manufacturing to the final phases of goods and services delivery. The major economic factors that have a high impact include interest rates, unemployment rate, consumer price index and the disposal income. Oil and gas are the primary sources of energy in the US, and these industries create employment for thousands of families. The economic fluctuations affect the oil and gas sectors directly. The process of mining oil and gas is very expensive, when there is an economic glitch, the companies incur losses which influences the future of the industries.

The second factor in this segment is financing. Most of the companies in the oil and gas industries have to outsource funds to run their businesses. Banks and private sectors are usually hesitant to give them loans, although mining is considered to be highly profitable business. However, these industries remain highly risky, since a slight fluctuation in the oil prices causes a big change in the profit margin.

Political/Legal Factors

The first factor in this segment is political climate. The general mood and opinion of people is always subject to change. Every alteration of attitude and views affects the political equilibrium of the nation. Therefore, the political and legal influence on the oil and gas industries narrows down to the perceptions, judgment, and values of particular individuals in the country. As a result of these changing opinions, the oil and gas industries face a lot of resistance from the general public and the government. It has a direct impact on the companies and their productivity.

The second factor in this segment is the regulations and laws, and their evolution over time. Currently, governments of different countries use their power to encourage the use of the renewable forms of energy that do not affect the atmosphere, developing which is usually very expensive hence increasing the cost of production. Additionally, laws that govern and control the emissions of the industries impact them negatively as well. The first enactment of the legislation to regulate emissions in the US was made in the year 1970, It was the Clean Air Act. The laws also change over time as amendments are made to ensure that the laws control the industries properly and efficiently.

Socio-Cultural Factors

The first factor in this segment is the public attitude toward renewable energy. The perceptions and the values of the entire population can affect and change the demand on the oil and gas products. Although values and opinions usually tend to evolve over time, they significantly influence the general environmental issues. The public expresses growing concern about the global warming issues that has reached the US in the last few years and has caused considerable opposition from the general population. Public opinion, therefore, has significantly influenced the discussed industries and brought alternatives to the sector which, according to the majority, are better but very expensive to the sectors. For example, instead of using coal in the processing stage, the manufacturers should use renewable sources of energy and the nuclear production.

The second factor that affects this segment is environment protection and sustainability. The society is moving forward to protect the atmosphere by opposing the carbon and CO2 emissions that are growing globally due to the slow development of the renewable energy and the nuclear power.

The third factor in this segment is technological improvements. Current technological improvements in place are reducing the power consumption in cars, buildings, and factories, which ensures the efficient use of the oil and gas products. However, the new technologies and the new sources of energy are also facing challenges from the public opinion and perception after nuclear disasters, making it difficult for the industry to grow.

Technological Factors

The first technological factor that affects the discussed segments is the technological development. Technology has advanced and influenced the production of energy in many ways. During the history of power generation, the US has evolved from using coal as the main source of energy to using nuclear plants and renewable sources of energy. This advancement was pushed forward by the general public view and perception, as people have realized that their overdependence on fossil energy poses a significant threat to the environment and atmosphere. However, renewable sources of energy are still very expensive when one begins to use them. Previously, installing solar panels was even more expensive, but now, with technological development, it has become easier and cheaper to install them. Technology has also impacted on the wind power industry, which now is using low wind areas to increase the efficiency per each turbine. These technological breakthroughs have made the United States increase the use of renewable energy in production processes which reduces environmental disasters. Technological developments have improved the entire production line and delivery over the years. Moreover, these changes have positively impacted on the on the standards of the products. Nonetheless, the producers are now continually revising and improving technologies they use in their production processes and delivery to always meet the standards.

Global Factors

The first factor that affects the discussed industries is the international trade. Companies all over the world are meeting in the same markets with the same or different products. Competition is getting stiffer and corporations are working on the improvement of their goods and services.

The second factor of this segment impacting on the industries in question is globalization of the production and outsourcing. Due to the increase in demand, firms are expanding their regional operations beyond their borders. Outsourcing of forms of energy and labor also makes the production cheaper and enables the companies to meet the set standards and compete globally. Knowledge and information transfer are now bettering the production as well; technological employment can now meet the standards in production in a more efficient manner.

The third factor that affects the discussed industries is localization and community engagement as anti-globalization advocate. Local communities have different perceptions on globalization, and some of them are against it advocating for localization as a good alternative. However, oil and gas companies in the US are embracing the idea of globalization, because it allows entering more markets all over the world and promises a brighter future for their business.

Summary and Integration

In summary, all the six major groups of environmental factors that have an influence on the oil and gas industry are indeed important and cannot be overlooked. Every profitable industry has a substantial interest in the aspects that might have direct or indirect impact on the production and marketing of their products. Moreover, the changing market dynamics over the years calls for making forecasts to determine the viability of business in the future. Market viability and competitiveness are indeed of concern for all firms. Nonetheless, there is a direct relation between the discussed factors and production. Demographic, economic, political/legal, socio-cultural, technological, and global aspects as analyzed before have a direct impact on energy generation firms. Various laws that govern the power generation companies are always subject to amendments over time. Human opinion and values also change with time as well as the technology is constantly advancing.

Apparently, energy production companies should employ the new forms of energy and the new technologies in their production processes to control pollution. As population increases and the demand for energy rises, the future of oil and gas industries becomes even brighter as seen earlier. Therefore, development of the production process based on the global information and technology has brought forth the use of low-emitting fuel and the reusable sources of energy. Nowadays, energy production industries should maintain the standards of production, not neglecting the main environmental factors that influence their operations.

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