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IS THIS END OF CRUDE OIL INDUSTRY?

Booms and bust cycles are very much a part of investing in the fossil
fuel sector. In previous energy downturns, prices frequently
experienced serious slumps, but oil and gas companies mostly kept
faith in their biggest asset: Oil and gas reserves buried deep in the
ground. But things are markedly different this time around.
The Oil Age has powered the world for well over a century. There have
been two general thought about how it will ultimately end

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IS THIS END OF CRUDE OIL INDUSTRY?

  1. 1. IS THIS END OF CRUDE OIL INDUSTRY? CORPORATE STRATEGY
  2. 2. “Booms and bust cycles are very much a part of investing in the fossil fuel sector. In previous energy downturns, prices frequently experienced serious slumps, but oil and gas companies mostly kept faith in their biggest asset: Oil and gas reserves buried deep in the ground. But things are markedly different this time around. The Oil Age has powered the world for well over a century. There have been two general thought about how it will ultimately end. 2 CORPORATE STRATEGY
  3. 3. IMPACT OF FALLING OIL PRICES: ▪ Temporary phenomenon ▪ Will increase the oil consumption ▪ Low price will make unconventional oil exploration absolute. ▪ Will make market difficult for the EVs ▪ Will make market for competitive and free ▪ With free market the oil consumption will increase. ▪ Will no cartel price will fall which makes oil an attractive option. ▪ Will improve technology and help in increasing production 3 IMPACT OF NON FUNCTIONING OF OIL CARTEL: CORPORATE STRATEGY
  4. 4. INCREASES IN EVS ANDRIDE-SHARING Fast forward a few years, and a new version of the end of oil began to take hold. In this version, exponential increases in electric vehicles (EVs) and ride-sharing are predicted to be two key factors that will make oil obsolete. In this version, oil prices plunge as demand starts to fall. This is the exact opposite of the peak oil argument, where oil prices surge as supply starts to fall. 4 CORPORATE STRATEGY
  5. 5. ARE WE THERE YET? I don’t think so, but it is hard to say what the lingering impact on oil demand will be from the coronavirus pandemic. When oil demand dropped during the 2008-2009 financial crisis, it bounced back strongly in 2010. I am not so sure that’s going to happen this time. This pandemic seems destined to change our world in a number of ways, and some of those ways involve lower oil demand. The Paris Climate Agreement set to limit global warming to no more than below 2 degrees by the turn of the century if our planet is to avoid catastrophic and irreversible climate change. But here's the alarming news: Our current trajectory shows that we are heading for a 3.2 degrees temperature rise by 2100, which gives us a tiny 10-year window to severely curtail our greenhouse gas emissions or forever face the consequences of our folly. 5 CORPORATE STRATEGY
  6. 6. ARJUN REGHU20191005 MBA E&I, SCHOOL OF PETROLEUM MANAGEMENT PANDIT DEENDAYAL PETROLEUM UNIVERSITY 6 CORPORATE STRATEGY

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Booms and bust cycles are very much a part of investing in the fossil fuel sector. In previous energy downturns, prices frequently experienced serious slumps, but oil and gas companies mostly kept faith in their biggest asset: Oil and gas reserves buried deep in the ground. But things are markedly different this time around. The Oil Age has powered the world for well over a century. There have been two general thought about how it will ultimately end

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