Making a profit is the foremost aim of big companies. There are immense opportunities in the energy sector for making benefit. Crude oil is the third most consumed energy type in the world. It is a liquid fuel that is dug out from the ground. It is not only used in vehicles but is also used in electricity generation, various petroleum products and plastic. Crude oil has contributed in various directions. Some of them are discussed below.
Industry expansion
The expansion of this industry can be understood by the fact that now there are hundreds of crude oil companies present in the world. In 1880 Rockefeller started his company Rockefeller refinery and almost 80 percent of the world’s oil was produced in the US. After that more companies were established Royal Dutch and Shell trading companies. Royal Dutch gave tough competition to Rockefeller by pulling the cheap Russian oil in the market. Another company that came to challenge them was Anglo Persian which is now called British Petroleum. They entered the Middle East oil fields as well. After some time they joined and founded a system of a joint venture.
Economic development
The wealth a country gains as the benefit is termed economic development. It changes the emerging economies into large economies. Low living standards of a country are replaced by high living standards. Companies that buy crude oil can be the biggest driving factor in the way of economic development of a country. Various contract and property laws and financial laws and agreements were introduced by the petroleum industry. The running industries that require fuel are also supplied fuel by the petroleum industry.
Foreign policy
Foreign policy refers to the objectives on which a state interacts with other States, Unions, multinational organizations. Strategic relations between the countries can also be established by oil. Foreign policy goals, alliances and bonds are formed by this commodity. China is one of the leading examples that have oil-based relations with Venezuela, Iran and Russia.
Oil investment
Nations invest in order to multiply their money and gain benefits. If the investment is done in a proper way it can return you huge benefits. Investment is done in many fields depending upon their interest. Countries that are willing to produce oil can be rich in oil reserves but can face a decline in other economies. Oil companies focus on generating revenues by maximizing their production. Investment by national oil companies is very important because if they neglect it the oil prices will surge. And if they restrict international countries from investing in their country the oil market can become supply-constrained. And in the case of investment prices might get high. Private international oil companies are limited to making investments because of a number of reasons.
The first could be that they don’t have access to potential reserved areas around the world. Also, large companies have experience and expertise in developing and operating large fields which takes it away from them. The international oil companies make investments on future market price oil that results in low investment.
Efficiency
Efficiency can be attained by maximizing the output. Geological factors are also responsible for the productivity of the oil industry. By maximization, the oil companies have achieved efficiency.
Independence
After World War two many importing oil countries created their own oil companies. They worked on increasing their supply to reduce dependency. The regulation was set up by the government to prevent abuse of power or monopoly.
Energy security
The availability of natural resources and their linkage to national security is called energy security. It is an important factor for crude oil companies. Demand-side security means not allowing one consumer to influence the company. But sometimes long-term relationships between oil exporters and importers facilitates them in specialized domains. Security of supply is the object behind energy security by oil companies. In oil market, it refers to the diversity of producers and the security of oil supply lanes.
Conclusion
Being one of the largest industries crude oil has served benefits in various fields. After its expansion, it contributed to economic development, independence and energy security. It also affected foreign policy.