The Oil Industry
Over the years, the oil industry has been a major component in the world economy. It can dictate the increase or decrease of prices that affects other basic commodities and the financial structure of a country, specifically the undeveloped and poor countries. The increase in the price of oil in the world market directly translates the high-cost adjustments in the use of energy and transportation which basically rippling down the effect to manufacturing industries that mainly rely on oil to sustain their operations.
It can be said that sustainability of daily living is dependent on oil because majority group of industry sectors processes the production and distribution of goods by using oil as the primary source of energy to running the machineries, factories, transport systems within the commodity supply chain. The countries in the Middle East, like Saudi Arabia, Egypt, Iraq, Iran, among others thrive on oil which has been contributing millions of dollars to leading economic allies, like US, Japan and the European Union.
The situation in the world market can be global domination through the control of oil supplying to the rest of the world. In an article by Henry Kissinger and Martin Feldstein entitled ‘The Power of Oil Consumers’
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The major strength of the oil industry not only relies on the traditional competitive market. In fact, oil producers such as the members of OPEC have the power to increase or decrease oil prices by minimizing or increasing the production and supply. The price of oil is a major factor in the determination of future supply and demand of manufactured goods, and the top suppliers of oil can control the volatility of the international and domestic markets. Unless oil consumers find a way to reduce their dependence on oil, major suppliers will continue to dominate the world market (1).
This paper will discuss and examine the situations and issues of the oil industry, relating the basic inquiry on the role and future of oil industry to world economy and the importance on the demand and supply of oil in major industry consumers, as well as probing the influence of industry leaders affecting the producers and consumers. Discussions Overview In an electronic article entitled ‘Oil and the Future’ by Richard Reese and published by Eco Action. Org in 2007 explains that there was a commonly held belief that the world’s supply of oil would be sufficient until the year 2040.
However, this notion is now being challenged by senior geologists in the oil industry because it is grossly optimistic and dangerously misleading. These views are being published in respectable industry periodicals such as World Oil and the Oil & Gas Journal (1). Realizing the viability of the oil industry to their economy, David Painter (2006) in his article entitled ‘Oil’ published in the Encyclopedia of American Foreign Policy explained that the United States included oil in their 20th century foreign policy.
The industry is integral to military power as well as in industrializing society. This predicts that having control of local oil supplies compared to availability of international oil reserves is a significant aspect which is most of the time overlooked in the United States quest to remain among the powerful countries. It is said that while there was a huge demand for oil on a global scope, top industrial powers, except the United States and Soviet Union, had minimal local oil production as the principal oil suppliers were not among the industrial powers (3).
In the United States, control of oil has been connected to the widening of political, military, and economic objectives as seen in the foreign policies of postwar administrations, such as the administrations of former US Presidents Truman, Eisenhower, Nixon, and Reagan, which focuses on creating direct or indirect relations to the Middle East. The impetus on oil has played a crucial role in the development of American foreign policy making the effect on oil on the environment as important as finding access to oil (3). The Role of the United States in the World Oil Industry
As claimed by David Painter (2006), the United States was the most dominant oil producer in the first half of the 20th century, wherein American oil fields comprise slightly over 70 percent of production in 1925, 63 percent in 1941, and more than 50 percent in 1950. During that time, the U. S. oil industry was strictly regulated and involved a permissive legal regime, generous tax treatments, and cooperative system of national production control with Texas being the center of the industry. The state comprised nearly half of the country’s oil production (3).
During the ‘US Great Depression of the 1930s’, the Federal government collaborated with several state governments as well as with oil companies in establishing a control system that would place a limit on total output and distributed production so that marginal producers would be able to cope up with the huge excess capacity. While state authorities did not require producers to pump activities in each oil field resulting to wasteful processes to continue, the new system paved the way for high-cost marginal wells to sustain production, resulting to the preservation of lower-cost fields for future use (4).
It may be found that the United States was more than capable of stabilizing the oil producers and obtaining access to their fields. It has already established itself in the oil-rich region between the Gulf of Mexico and the Caribbean. It was of primary importance to secure the Persian Gulf, which at that time was the hub of the world’s oil industry, but it was a daunting task due to several reasons. First, there was a great distance between the US and the Persian Gulf. Second, there was also the emergence of rival powers, such as Great Britain.
Third refers to the dynamics of politics in the region. In World War I, Great Britain was the leading country in the Middle East but the United States took over in World War II (4). Getting access to foreign oil first became a part of U. S. foreign policy after World War I. The primary importance oil is reflected in modern industries as well as in modern warfare. Likewise, the United States was worried about consuming its domestic reserves and there was a need for American oil firms to enter the foreign market for additional supplies.
The discovery of the East Texas oil field in 1930 resulted to the quick recovery of oil production in the country as well as increasing the presence of American oil firms in overseas oil fields (4). Equal Access to Oil David Painter (2006) further implied that aside from the United States, Great Britain was also keen on entering the Middle East oil market. After being given options of either government ownerships of oil reserves or dividing the world into spheres of influence, the United States instead opted for an Open Door Policy allowing equal access to oil for American oil firms.
A clash with British companies was prevented when the US supported moves to establish private cooperative arrangements between American and British oil companies. In 1928, the Iraq Petroleum Company became the first consortium between selected US oil companies and British and French oil firms (4). To ensure cooperation, the deal contained a self-denying ordinance that prevented members from venturing into oil development projects within the region of the old Ottoman Empire, which was indicated by a red line.
Aside from this consortium, a series of agreements was sealed from 1928 to 1934 providing for British and American oil firms to work to manage global oil economy through market allocation, fixed costs, elimination of competition, and duplication of facilities (4). The United States involvement in World War II led to the straining of American oil reserves. The likelihood of insufficient oil supply became a major concern forcing American policymakers to turn their sights towards Middle East, particularly Saudi Arabia.
Believing that government ownership was necessary for the protection of national interest as well as secured access to oil, the Roosevelt administration thought of establishing a government-owned company to replace the concession rights in Saudi Arabia of the Arabian American Oil Company (ARAMCO), which was jointly owned by the Standard Oil of California and Texas Company. The construction of an oil pipeline running from the Persian Gulf to the Mediterranean was also proposed for the purpose of showing and protecting US interest in the region’s oil (5).
However, such ambitious plans were derailed as a result of divisions within the American oil industry as well as staunch opposition from ideological American businessmen and politicians of government getting involved in corporate affairs. Aside from that, the owners of ARAMCO were not willing to sell the company completely although they were amenable to some government involvement. The remaining sectors of the oil industry also showed their opposition to government involve in corporate affairs leading to the abandonment of the plan (5).
In addition, while oil firms that would greatly benefit from the construction of the pipeline, other oil firms was not in favor realizing that it would be to the advantage of their competitors. The local procedures also feared that the creation of the pipeline would pave the way for the entry of Venezuelan oil from the European markets into the United States. With Congress joining the fray, the move was totally defeated (5). However, a series of private deals in 1946 and 1947 led to the expansion of ARAMCO and the integration of Middle East oil into the world market thereby reducing the strain on oil reserves in the Western Hemisphere.
The US government supported equal sharing of profits between the oil firm and the host government. The Oil Industry in a Nutshell As implied by David Painter (2006), Oil provides 40% of energy in industrial countries. It is a critical resource in the agriculture, transportation, and chemical industry. To a large extent, oil has been a driving force in the growth of the human population is better than the energy of the sun. Until 1962, the rate of oil discovery was at an upward trend. Since 1962, however, the discovery of new oil fields has been steadily decreasing.
The 1973 embargo by the OPEC led to a sharp increase in exploration activities. Despite the use of high-tech exploration technology, there was still relatively minimal oil discovered (5). Accordingly, there are two principal sources of oil namely OPEC and non-OPEC. The former comprise a huge chunk of the world’s oil reserves while the production of oil in the latter has slowly decreased. In a span of 10 years, OPEC countries will be the leading source of oil. The Persian Gulf is the base of majority of the world’s remaining oil.
It is believed that several countries in the region possess nuclear, chemical, and biological weapons. In oil-rich nations, Islamic fundamentalism is growing due to their anger with the abuses of non-democratic feudal monarchies (5). In the 2009 article ‘Major Oil Companies Operating in the Gulf Region’ by Eric Thompson which was electronically archived by the Jewish Virtual Library has compiled a list of oil firms holding office in the Persian Gulf. In Bahrain, the Harken Oil in Grand Prairie, Texas, is partly owned by Bass Enterprise Production Company, which is a major stockholder, with George W.
Bush as one of minority shareholders. In Iran, there are four major foreign oil firms namely Gazprom, Shell, Petronas, and Total. The Japanese Exploration and Production Company, PetroCanada, Elf Aquitane, and Ultramar Canada are currently negotiating with the Iranian Government. Chevron and Coastal are importing Iranian crude (1). In Iraq, the Oil Ministry is charged with overseeing the nationalized oil industry headed by the Iraq National Oil Company (INOC). Previous American oil firms in the country include Haliburton, Mobil Oil, Pullman-Kellogg, Howe-Baker Engineering, Inc.
as well Shell, BP, Chevron and Coastal have shown their interest in importing Iraqi crude. In Kuwait, there are ten foreign oil companies operating namely British Petroleum Company, Chevron, Getty Oil Co. , Gulf Oil, Arabian Oil Company of Japan, Mobil Corp. , Royal Dutch/Shell, Shell International Petroleum, Texaco, and Total (2). Oman is home to 15 foreign oil firms, such as Enron, Mobil Oil, Mitsui, to name a few. In Saudi Arabia, Mobil and Shell are the two foreign oil companies. The state-owned ARAMCO is presently operated through a concession by Socal, Texas Oil, and Socony-Vacuum.
Aside from ARAMCO, there are five other oil firms that are state-owned. Finally, in UAE, there are seven foreign oil firms, such as Caltex and Pennzoil (2). The State of the Oil Industry This year, Specialist in Energy Economics and Policy Robert Pirog has presented a report entitled ‘Oil Industry Profits: An Analysis of Recent Performance’ published in the Library of Congress, in which it reported that the rapid increase in the cost of crude oil which started in 2004 until 2005 has been a major contributor to the record income earned.
The increase in the price of crude oil is also being attributed to other factors. For instance, the high capacity of utilization in the refining industry as well as the capacity for expansion of output might have a role in the increase in profitability. Aside from that, there are also the mergers and acquisitions as well as asset transactions which likely affected the income of various firms in the industry (2). More important than the income level in 2004 and 2005 is what the oil industry decides to do with them.
For instance, if firms decide to expand their capacity in various stages in the production chain, consumers would most likely see a moderate effect on the price as a result of the supply expansion. On the other hand, if the firms do not invest in expanding their production capacity or if their investments generate diminishing returns in terms of volumes of oil and products per dollar, then its impact on the cost is likely to be limited (3). The cost of crude oil increased in the last eight months of 2004, with West Texas Intermediate, the standard benchmark oil, reaching more than $55/barrel in October.
The figure represents an increase of 60% over the low price for the year, which was reached in January 2004 of $34. 31. The cost of the WTI was 25% higher during the last six months of 2004 than it was in the initial six months. After a moderate increase at the conclusion of 2004, the price of crude oil was more than $60/barrel during the summer months (3). The price of gasoline, which has a direct impact to consumers, increased in May 2004 much earlier than crude oil, which increased in October. Reformulated gasoline which costs $1/gallon at the New York Harbor increased by 41% to $1. 41 a gallon.
Another round of gasoline price increases occurred in June 2005, reaching $1. 58 per gallon. The increase in gasoline cost translated to an increase in revenue for the oil industry. Oil firms were able to expand their supply as well as make investments in the industry (3). Based on figures released by Pearson Education in its almanac entitled ‘Top World Oil Producers, Exporters, Consumers, and Importers’ published in Infoplease. Com in 2006, the biggest producer of oil with 10. 72 million barrels daily was Saudi Arabia, while Russia and the United States were second and third with 9. 67 and 8.
37 million barrels a day, respectively. Iran is the fourth largest with 4. 12 million barrels a day, while Mexico rounds out the top five with its 3. 71 million barrels a day (1). Among the oil exporters, Saudi Arabia emerged as the leader with its 8. 65 million barrels exported daily. Russia ranked second with 6. 57 million barrels worth of exports daily. The United States is tied for fourth with Iran at 2. 52 million barrels/day. The US was the leading importer and consumer of oil in 2006. Its total consumption for the year was 20. 59 million barrels per day while its net imports amounted to 12.
22 million barrels daily. As far as oil consumption is concerned, China is a distant second to the United States at 7. 27 million barrels a day while Japan is the second top importer of oil at 5. 10 million barrels daily (2). In the book ‘The New Global Oil Market: Understanding Energy Issues in the World Economy’ authored by Frank Millerd and published in 1995 by Questia Media America, Inc. discusses oil production for the year 1992. Based on the book, the United States, Russia, Iran, Mexico and Saudi Arabia emerged as the top five oil producers for year 1992.
The Middle East was the region with the biggest production. OPEC states contributed slightly more than 40 percent of the total production. Distribution of production reflected a considerable difference with the distribution of published proven reserves. Although North America accounted for 16. 2 percent of world production, they only had 4. 0 percent reserves. Western Europe contributed 7. 2 percent production, but only 1. 6 percent reserves. In contrast, the Middle East had 28. 4 percent production but had 65. 7 percent reserves (4).
In related information, the article ‘Oil/Gas Shareholders in Senate Hear Testimony from Industry Execs’ which was written by Lindsay Renick Mayer and published in 2008 by Capital Eye Blog has reported that four Republican lawmakers benefited from the oil industry by investing between $30,600 to $135,600 in five companies, namely BP, Shell Oil, Chevron, ConocoPhilips, and Exxon Mobil. Mayer (2008) likewise revealed that six members of the Judiciary invested between $119,700 and $468,700. Congress as a whole invested between $10. 5 million to $31.
1 million in the five oil companies. Exxon was the least popular investment of about $5. 3 million (1). Moreover, the oil and gas industry has contributed over $216 million to Federal candidates and parties; 75 percent of the amount went to the Republican Party since the 1990 election. The 2006 members of the Judiciary Committee received $4. 1 million with 85 percent going to the Republicans. During the last elections, the oil industry contributed $8 million to Congress making it the 17th most generous industry to Federal politics.
Due to the high prices in the last couple of years, the worth of personal investments made by lawmakers has increased considerably (2). Threats to the Oil Industry Daniel Altman and Neela Banerjee in their article ‘War Unsettles Oil Industry and the Economy’ published in 2003 by the New York Times have revealed that the threat of war has left the members of the Organization of Petroleum Exporting Countries (OPEC) scrambling. Ahead of their meeting in Vienna Austria in 2003, analysts came to the conclusion that there is nothing that can be done as far as the OPEC is concerned.
For consumers, businesses, and investors in the United States, planning for the uncertain is disappointing as it slowed down the economy trying to better its meager development in 2002 (1). Since the 1991 Persian Gulf War, crude oil prices are at a record high and according to Standard & Poor’s the cost of high energy have consumed $50 billion for the economy as far as consumer purchasing power is concerned. The Energy Department predicted that by April 2003, consumers can look forward to paying high gasoline prices in much of the country.
An assessment of price movement and economy reaction requires looking back at history wherein the deployment of American troops near Iraq as well as worries that oil supplies from the Persian Gulf will be disrupted. Such feeling contributed to the increase of oil prices to more than $30/barrel for several weeks (2). Prior to the invasion of Kuwait by Iraq in 1990, there was a proliferation of oil and prices were below $20/barrel. However, after the United Nations implemented an oil embargo on Iraqi and Kuwaiti oil and removed over 7 percent of global oil supplies, costs started climbing.
By October 1990, the cost of oil went up to as high as $41 a barrel but dropped considerably when OPEC increased production to compensate for the oil embargo. When the United States launched their attack on Iraq in January 1991, oil prices dropped to $18/barrel (2). Any war in Iraq could potentially mean a loss of 2 million barrels daily from the world market. Some experts believe that the OPEC has extra supply of oil in Saudi Arabia which can compensate for the loss oil. However, other analysts are saying that the OPEC members are already using full capacity in an effort to prevent prices from going even higher without stifling demand (3).
Ben Venzke and Aimee Ibrahim in their year 2002 article ‘Al-Qaeda Threat to Oil Industry and US Allies’ published in Intelcenter. Com believes that the Al-Qaeda terrorist network is poses a potential threat to the oil industry. Accordingly, experts believe that a follow-up attack after the US 9/11 tragedy terror acts will be implemented at a time Al-Qaeda thinks it will benefit them. As cited, Venzke and Ibrahim (2002) has analyzed that the threat from the group will focus on the oil industry as well as the allies of the United States, in which they described the following:
? Tankers that supplies to oil shipping lanes particularly in the Arabian Gulf and Horn of Africa are potential targets of Al Qaeda. ? The threat is not only exclusive to shipping lanes but includes ports, loading points and facilities as well as infrastructure which were based on the statement of the Political Bureau of Al-Qaeda on October 13, 2002. ? German, French, and Australian interests within and outside their territorial borders are potential targets. ? At greater risk, are the United Kingdom and Canada as well Jordanian and Arabian interests are likewise potential targets by the Al-Qaeda.
The attacks on the allies of the United States are designed to be dual targeting. For example, an attack on Australia will also target its tourism industry. Whenever possible, Al-Qaeda threats will always be dual-purpose targets. During the last 10 months of 2002, there was a continuous wave of Al-Qaeda affiliated attacks on the United States and the interest of its allies in Afghanistan and Pakistan. For instance, the bombing operations in Karachi, Pakistan on May 8th 2002 have led to the killing of several French nationals (2).
Other Al-Qaeda coordinated attacks on US allies include the explosion of car bombs next to Sari club and other establishments in Bali, Indonesia on October 12th 2002 which killed Australians and other foreign nationals, and the bombing of a fuel tanker in the Ghriba Synagogue in Djerba, Tunisia has accounted death toll of 19 people which included 14 German tourists, together with the detonation of a car bomb in Karachi, Pakistan which killed French naval engineers boarded on the bus (3). The Future of the Oil Industry This year’s article of Tony Eriksen ‘World Oil Production Forecast-Update May 2009’ published in the OilDrum.
Com provides a forecast of how the oil industry will perform in the years to come. Although oil production in the world market increased to 74. 8 million barrels daily in July 2008, it is predicted that the production will experience a gradual decline by December 2010 with the OPEC members increasing their production and the non-OPEC countries decreasing their production. From 2010 and beyond, the annual decline rate of production will continue to go up at 3 – 4% as the production of OPEC member countries will be unable to compensate for the decline in the production of non-OPEC countries (1).
According to reports by the Energy Information Administration (EIA), production of crude oil had its peak production in 2008 at 73. 78 million barrels per day, exceeding its previous high of 73. 74 in 2005. The EIA predicts that production of crude oil is expected to decrease even further as the production of non-OPEC countries is expected to drop at a faster rate in 2009. This is also due to the huge decrease in oil production from Russia, Norway, the United Kingdom, and Mexico. It is predicted that come 2011, OPEC will no longer have sufficient supply to offset the decrease in oil production of the non-OPEC countries (2).
Average oil price is expected to stay at the $80/barrel level for the remainder of 2009 since the average demand is expected to be slightly higher than the supply for the entire year. OPEC is unlikely to reduce supply which will minimize the upward strain on oil prices. However, it is expected that the prices of oil could go beyond $100/barrel in the latter portion of 2010 as liquids production in the world will see a further drop. Delays in investment will result to high volatility of future oil prices leading to future oil capacity additions to gradually decline by 2012 (2).
Herman Franssen’s year 2005 presentation, entitled: ‘The Future of Oil: Will Demand Meet Supply’, predicted a bleak future for the world oil industry. Recent studies conducted in 2004 and 2005 revealed that production of oil in non-OPEC countries would increase by the middle of the next ten years. By this time, uncertainties about the capacity of OPEC to meet incremental demands would increase. Between the periods 2015-2020, it is being predicted that the OPEC will have difficulty offsetting the differential between the supply of non-OPEC countries and global demand for oil (1).
The OPEC members with high reserves would prefer to conserve their oil rather than maximize their net present value. If this happens, world oil production will increase earlier but the plateau will be much longer. On the demand side, developing countries like China and India have consumed as much oil over the past few years. With rapid industrialization and road expansion, the demand for oil in these countries may be twice as much within the next 15 years (1).
It is estimated that 75% of future demand for oil will be coming from developing countries and two-thirds of the demand would be coming from China and India. With oil production in non-OPEC countries peaking and OPEC members experiencing non-technical supply constraints, the potential for growth of a developing country would most likely be affected (2). Franssen (2005) predicted that oil producing countries in the Middle East would not be able to meet its technical production capacity, which he described the following reasons (2):
• Governments will became the operators of oil reserves and will opt for a long “production plateau” to prevent a boom and bust economy, as well as to sustain their income to allow them to become independent on oil. • Internal political conflicts, wars, revolutions, and regional geopolitical growth could limit their capacity to expand production in the region. Meanwhile, Director and Executive Vice President of Exxon Mobil Corporation Harry Longwell provide his own prediction of the future of the oil industry in ‘The Future of the Oil and Gas Industry: Past Approaches, New Challenges’, published in the website of World Energy Source in 2002.
Longwell (2002) sees the demand for oil and gas increasing from 2010 at an annual rate between 2- 3 percent, wherein oil and gas is critical for sustaining economic development and for countries working their way towards progress (3). It was also forecasted that oil producers would meet the challenge of declining production as half of the daily volume required to meet the demand would no longer be on production. The oil industry would require an additional 80 million barrels per day in order to meet global demand.
The cost for acquiring this amount of oil would be $1 trillion yearly, which is more than the expenditures of the oil industry at present. Demand for natural gas is peaking higher than oil as countries are now pushing for a clean and efficient source for electric power. Additional gas resources have surpassed demand for majority of the last century brought about by major discoveries in Russia, the Middle East, the Netherlands, and Indonesia (3). As counter-claimed, industry experts are not looking forward to a bright future for the oil industry. President of Novum Corporation L. F.
Ivanhoe thinks that it would just be a question of supply and demand which will lead to a major increase in the cost of crude and other fuel products. On the contrary, Dr. Walter Youngquist predicts that the oil industry is headed for disaster once the resources are consumed. The political situation in the Gulf region is marked with instability which further places in jeopardy the future of the oil industry. Once stability deteriorates, the oil crisis will commence (3). With the bleak future being predicted by industry analysts, it would seem logical to look for an alternative for oil.
However, there is no current evidence that clearly supports these alternatives. Longwell (2002) implied that petroleum is still the most viable option for transportation, food, and chemical manufacturing, as follows the following claims: ? Liquid Petroleum Gas (LPG) is a low-volume by-product of oil refining. Thus, the supply of this oil alternative cannot be increased and is a non-renewable fossil resource. ? Like LPG, compressed natural gas is a non-renewable fossil resource. Unfortunately, when the price of oil increases, gas reserves will be quickly consumed.
? Producing methanol through biomass is more costly than natural gas or unfinished gasoline. This is not a practical solution to oil crisis. ? Production of ethanol demands more input of energy than the contents of the finished product. ? Creating fuel cells is not an economically practical alternative at this time. ? Using hydrogen technology is far from being economical and is unlikely to be. ? Fusion energy requires huge amount of radioactive material as a byproduct. At present, the most possible sources of energy would be nuclear, coal, and solar.
The first two are likely to be considered because of obvious reasons. Solar energy, on the other hand, entails a much smaller population of humans. In the early 19th century, an agricultural population of 1 billion consumed the topsoil that it relied on. A non-agricultural population has high potential for long-term sustenance but may require a population between 4 to 10 million on a global aspect, in which data collected concerning projections for the oil industry is dependent on four types of oil reserves, as follows (2): ? Active Reserves- refers to oil produced using modern technology for income
? Inactive Reserves- although present, this refers to oil that cannot be produced with contemporary technology for profit. ? Political Reserves are non-existent oil that is reported by government agencies for political interests. The quota for OPEC oil production is determined by data provided by every member. ? Frozen Reserves represents oil produced by active-oil suppliers which remain constant year in year out. The prediction that the world’s oil supply will last until 2040 is based on the current consumption rate. It is worth noting that a 7% growth rate translates to doubling consumption every decade.
Oil consumption in developing countries is currently on an upward trend. The EIA predicts that with the way things are going, global oil consumption will peak at 50% in the next couple of decades (2). By 2010, oil production is projected at 52 million barrels per day. However, with the current rate of consumption, it is likely that it would increase to 94 million barrels per day by 2010. If new oil deposits are not discovered, countries can expect high oil prices, disruption of economy, and shortage (2). The illustration below shows the “peak graph” of oil production between 1900-2080 periods:
Source: The Oil Drum. Com (2009) Analysis of the Oil Industry The oil industry is a major player in world economy. Consumption fuels the economic activities of every country. The transportation, food, and chemicals manufacturing sectors rely heavily on oil consumption. The movement in the industry dictates the cost of prices of basic commodities such as food and fuel. A decrease in oil production will translate to an increase in price and vice versa. Control of oil is crucial to positioning in the world market. The importance of the oil