This is 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

Table of Contents

1 Background 
2 Market Structure 
3 Industry Definitions 
4 Market Metrics 
5 Industry Players 
6 Recent Trends & Developments 
7 Sources

Background

Global oil production was about 81 million barrels per day in 2007. The sources of production has been gradually shifting to Africa and Asia, while the Middle East and Europe continue to lose market share. Production in North America, South America and the Middle East actually contracted during 2007.

In 2007, the U.S. used approximately 20 million barrels per day of oil per day while it produces only 6.7 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.

2008 was a year of volatility. While oil spiked at over $140 per barrel mid year, it closed the year around $40 per barrel. How much of the price increase was due to speculation is unknown, but the rapid contraction in the world economy late in 2008 has had a significant impact on demand.

Market Structure

Production comes from many countries (see charts below) although it is certainly concentrated in certain geographic areas such as the Middle East, Russia, the North Sea and other areas. Exploration is expensive and undertaken by the major refiners, but large new tracts of untapped reserves have continued to diminish. The most easily tapped areas have already been found and new discoveries, such as those off the coat of Brazil will be more difficult to extract. It has been estimated, for example, that the largest player in South America, Petrobras, may have to spend over $500 billion to extract the newly discovered oil off Brazil as some of it lies 4000 feet under the floor of the South Atlantic off thr Brazilian coast.

Refining is done by many more countries than produce it and these are generally large oil consumers such as the U.S., Germany, Holland and smaller countries such as Trinidad and Aruba. Since the discovery, extraction, refining and distribution is extremely expensive, most of the global oil business is in the hands of very large well-capitalized companies such as Exxon, Chevron, Conoco, BP, Lukoil or Total.

At the same time, downstream refining and sales generally is likewise also controlled by only a few large companies.

Consumption of oil falls into several categories. Utility firms use it to power homes and businesses, but have several other alternative fuels they can use such as natural gas, coal, nuclear or even geothermal (e.g. in Iceland). Commercial enterprises use oil as both a source of power for factories as well as a raw material. Thus, many manufacturers are powered directly by oil, while chemical companies use it as a raw material in plastics and other products. Finally the individual consumers is a very large customer for the oil industry. Transportation costs such as personal cars or busses are major consumers of oil. In addition, oil and natural gas are used for home heating. With the price of gasoline or home heating hitting over US $4 per gallon during 2008, many consumers were forced to recondider their consumption of oil based products.

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.

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. Some countries with very small populations such as Kuwait, Gabon and Equatorial Guinea enjoy large reserves.

Source: British Petroleum

Top 12 Oil Producers Countries, 2007 (millions of barrels per day)

Saudi Arabia            10.4
Russia                   9.9
United States            6.9
Iran                     4.4
China                    3.7
Mexico                   3.4
Canada                   3.3
United Arab Emirates     2.9
Venezuela                2.6
Kuwait                   2.6
Nigeria                  2.3
Iraq                     2.1

Source: British Petroleum

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

Source: US Dept of Energy

Industry Players

The oil industry has many players but the major players are very large corporations which are able to generate the cash flow required for exploration, refining and distribution. These firms generally have dominated the stock market capitalizations of most countries within which they are based.

Major players in 2007:

Company   		Country		      2006 Annual Sales
                                                    (US $ billion)

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

Recent Trends & Developments

Crude oil prices have shrunk dramatically in 2008 and 2009. Having reached $143 per barrel in mid 2008, oil in early 2009 has ranged around US $45 per barrel. Price swings of up to $4 or $5 per day are common and the price briefly went below $40 in late 2008. Forecasts from respected industry watchers had hit $200 per barrel for oil in 2008. These have come down and new are being placed in the $75 dollar per barrel range by Middle East analysts for 2009. The continuing drop in global economic output and resulting drop in demand for energy may keep a cap on oil prices in early 2009.

Sources

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