This is free marketing research on the oil energy industry and can include information on the background, market structure, definitions, competitors, trends and developments of oil and is related to other topics such as gas, petroleum, energy, gasoline, diesel and kerosene.

Table of Contents

[edit] Background

Oil is a liquid found under the earth’s surface which forms a key component of global energy consumption. It is a hydrocarbon and is related to natural gas. It is currently the primary source of energy consumed globally. Crude oil is used to produce various products including gasoline, kerosene and fuel oils. Other type of oil derivatives include jet fuel, diesel fuels and heating oil. The majority of oil products are used for energy consumption but a smaller percentage is used as the raw material to create products in the plastics, pharmaceutical and other industries. Oil represents 39% of American energy use (natural gas and coal each represent another 22% of American energy sources) and the greatest part of it is used to power American transportation needs – e.g. car and plane travel.

Most oil extracted today is found in the upper layers of the earth’s crust and is found in some degree on all continents. It is difficult and generally expensive to extract and reserves are limited. At present, known reserves are generally estimated to last less than 40 years. The production rates of many countries with oil reserves vary widely with some countries such as Norway and the UK having a dozen or so years or reserve remaining while countries in the Middle East may have more than 100 years of remaining reserves. Oil is also present in a semi-solid form in oil sands and that source may be several times more than exists in purely liquid sources.

In 2006, the U.S. used approximately 20 million barrels per day of oil per day while it produces only 8 million barrels per day. The balance must be imported. That number is expected to rise to over 25 million barrels per day of consumption by the year 2025. The U.S. has limited reserves with refineries in the country currently working at full capacity. Globally, approximately 84 million barrels are produced a day.

[edit] Market Structure

Oil production generally comes from a limited number of key countries (see charts below). Refining is done by a many more countries who are generally large consumers such as the U.S., Germany, the Netherlands and others. Since exploration, extraction, refining and distribution can be extremely capital intensive, many of the key players are some of the largest publicly traded global corporations. Production is therefore sourced and controlled primarily by a select number of countries and the downstream refining and sales is also controlled by a select number of large companies.

Consumers of oil fall into several large categories. Utilities use it to produce power for distribution to local business and residential users. In many countries, oil is less a factor with some power utilities than those that use coal, natural gas or even nuclear power. Many manufactures depend on oil products as the raw material for plastics, other compounds and chemicals, etc. Finally, consumer pay for oil not only as a bundled cost in a plastic dish product they may purchase, but very directly through a home heating bill or at a gas station. The fluctuations in the price oil can have an almost immediate impact on the consumers daily living expenses.

[edit] Industry Definitions

• Gasoline – also called ‘gas’ or ‘petrol’. A hydrocarbon liquid often combined with toluene, octane and butane. It is a derivative oil product separated from crude oil through distillation.

• Kerosene – a clear hydrocarbon-based liquid derived from distilling crude oil. Kerosene is less volatile than gasoline and is used in the production of jet fuel.

• Fuel oil – a hydrocarbon based-liquid also distilled from crude oil. Fuel oils are generally placed into six classes. They are generally used for heating purposes such as in furnaces, although diesel is another form or fuel oil.

• Oil shale – a sedimentary rock that contains amounts of kerogen, a substance that has not been fully converted into a fossil fuel. This substance can be converted into synthetic fuel by heating it to the point where vapor is created. These vapors can be distilled into a form of oil.

[edit] Market Metrics

Oil is found on almost all countries to a limited extent. A very significant percentage of petroleum reserves lie in Middle East countries such as Saudi Arabia and Iran, while it is scattered in key pockets in countries such as Nigeria and Venezuela and area such as under the North Sea controlled by Norway, Denmark and the U.K. The U.S. currently has the greatest disparity between production and consumption as seen by the charts below. Some countries with small populations such as Kuwait, Gabon and Equatorial Guinea enjoy large reserves.

Source: British Petroleum

Top 12 Oil Producers Countries, 2006 (millions of barrels per day)

Saudi Arabia	        10.7
Russia			 9.6
United States		 8.3
Iran			 4.1
China			 3.8
Mexico		         3.7
Canada			 3.3
United Arab Emirates	 2.9
Venezuala		 2.8
Norway		         2.7
Kuwait			 2.7
Nigeria			 2.4

Top 12 Oil Consumption Countries, 2006 (millions of barrels per day)

United States		20.5
China			 7.2
Japan			 5.2
Russia			 3.1
Germany		         2.6
India			 2.5
Canada			 2.2
Brazil			 2.2
South Korea		 2.1
Saudi Arabia		 2.0		
Mexico		         2.0	
France			 1.9

[edit] Industry Players

The oil industry has many players but the major players are ultra-large corporations that can generate the cash flow needed for exploration, refining and distribution. These companies are often some of the largest corporations in a given country. A representative list of some of the major players in 2007 include the following:

Company   		Country			         2006 Annual Sales

Exxon Mobil		U.S.				$336 billion
British Petroleum	U.K.				$263 billion
Chevron		        U.S.				$189 billion
Total			France				$174 billion
Conoco Philips	        U.S.				$162 billion
ENI			Italy				$112 billion
PetroChina		China				$ 90 billion
Repsol			Spain				$ 63 billion

[edit] Recent Trends & Developments

Crude oil prices remain relatively high after coming down from a recent peak of $78 a barrel. Oil remains around $70 per barrel in mid 2007. Supplies of gasoline supplies have been limited and demand hit a recent in August 2007 The price of gasoline has dropped almost 10% from its mid year peak. The fall in natural gas prices has been much more pronounced, down almost 20% from its record close. Natural gas prices at this point have an unusually large discount vs. its traditional price ratio against crude oil. Both oil and gas prices may further weaken as there are signs that winter in the U.S. could be warmer than the past few years.

[edit] Sources

• Energy Information Administration
• U.S. Department of Energy
• Wikipedia
• U.S. Census Bureau
• Yahoo
• BP

[edit] Next Steps

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