Posted by Robosoft Solution - Robosoft Solution
A previously published report by Deloitte listed poor economic growth, trade conflicts, and global politics as the biggest challenges for the Oil & Gas industry. However, with changes in circumstances due to Covid-19; the industry is set to observe further turbulences over the next couple of years.
With a whopping global production of more than four billion metric tons of oil annually, the Oil & Gas industry contributes greatly to the global economy. Thus, making companies within the sector among the largest corporations worldwide. Through the years the Middle East, USA and Russia have been the top oil producers with over 13%, 13% and 12% ownership, respectively. However, due to the ongoing pandemic crisis, the US oil and gas segment experienced a drop in the demand for energy resources. Additionally, adding to the existing crisis are the oil price wars.
Industry Crisis Due To COVID-19
1) Price Drop: While the commodity market is frequent to constant price fluctuations; Covid-19 has caused a drop in oil prices due to travel restrictions, production downtime, worker furlough etc. Simultaneously, other commodities such as agricultural goods, metals and chemicals have been impacted as well.
2) Collapse in Demand: Overall, the demand for oil has scaled down to 30% of the average monthly demand.
3) Cost reduction: Owing to a drop in sales, several oil & gas companies are scaling down capital investment, operational costs and even skilled labour.
4) Bankruptcy: While giant corporations may have the potential to recover loses and dive into other industries; several small and medium businesses may experience bankruptcy due to lack of funding.
McKinsey highlights, there's a possibility of the oil & gas prices returning to normalcy i.e., pre-crisis levels at least by 2024, under positive circumstances. Whilst the next few years may seem challenging, a report by Statista suggests that this sector is bound to flourish in the long run. For instance, the demand for oil is expected to rise up to 109 million barrels in 2035 i.e., up by 20 million barrels since 2012.
While the ongoing situation is unpredictable, it is advisable for organisations to regularly conduct risk assessments for both the staff and the organisation at large. This requires, accurate forecasting, real-time data and a systematic business flow. To learn more about how you can efficiently manage end-to-end business processes in real-time, speak to one of our experts today.
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