Development in Gas and Oil Retail Industries

Question: Discuss the results due to alterations in structure of the UK retail industry, technological changes in the UK petroleum retail sector and influence of rising oil prices? Answer: Introduction The following essay evaluates the recent trends and changes in the UK petroleum retail market. These oil entities are the world leaders in oil and gas sectors in the country. Tesco, BP and Shell are one of the prominent petroleum retail brands operating under the oil and gas sector in UK (Mitchell and Mitchell 2014.). The UK petroleum retail market is facing enormous changes due to rising oil prices, structural changes in its composition, and technological advancements. Compared to the last decade, demand of petroleum products have also risen which is a major determinant of the economic condition of UK. However, petroleum retail brands needs to consider the scarcity of petroleum resources and the impact of maximizing production policies. Additionally Mitchell and Mitchell (2014) have stated retail petroleum entities could re-consider its pricing policies that are leading to decrease in demand of its products. The rise in oil prices would have severe impacts on the economic condition of the country, which includes job cuts, rise in transportation costs and disproportionate share of investment and resources. Petroleum retail entities are facing several obstacles in its path, and its survival depends on adapting to changing circumstances in the oil and gas sector Discussion Changes in the ownership structure in the UK retail market. The ownership structures in UK retail sectors have undergone some changes in the UK retail sector (Betz 2015). As such, it can be classified in the following three ways. Hypermarkets This refers to fuel retailing, and selling oil major gas products under their own brand name. For example- Tesco is the market leader in hypermarket segment in the UK retail store, Oil and Gas companies - This is the more traditional form of selling an oil; and gas product, where oil and gas resources are leased from another brand. BP and Shell are the major traditional Oil and gas entities that have been meeting UKs demand for a long period of time. Dealers- This refers to an individual or an independent business group, which is not part of any retail entity and a company. In the recent times, the reliance on UK domestic production have reduced due to substantial oil and gas imports from other countries. Beside this, in the recent times there is some drastic changes in the UK petroleum retail market. Total S.A which has been UKs leading fuel retailers has sold a large portion of the ownership to Ronetec. These acquisitions have proven to be beneficial for Rontec, and current holds the market share in fuel retailing. According to Sueyoshi and Wang (2014), this acquisition reflects the efforts of retail entities to expand their operations to successful compete, and make negotiations with fuel suppliers and distributors. In addition, Rontec made a business partnership with Shell, which boasts of a substantial presence in the UK fuel retail market. Tan (2016) mentioned that Shellss acquisition reflects existing market opportunities in the oil and gas-retailing sector. Implications of recent changes in UK petroleum retail industry Following are the implications of recent changes in the UK oil and gas retail industry. 1. Fragmentation in supply chain in vertical integrated oil companies have increased the efficiency and have decreased the costs of supplying transport fuels to ultimate consumers. Ross (2012)stated that due to decrease in supply costs, the prices of goods have automatically lowered. Petroleum retail entities like Tesco and Shells business prospects have suffered considerably due to such market attributes,2. Spare capacity relating to the distribution system to clients, have been decreased which have resulted in the reduction of resilience and robustness of the system. Devold (2013) argued that this hast resulted in wastage of petroleum products in the country.3. Fuel suppliers used to undertake the responsibility of physically distributing products. Recently, road haulers have taken that responsibility, and have been a cause of much labor disputes. Thus, it becomes essential that required HR policies are made to tackle such issues in the workplace.4. D. Major oil companies do not op erate in the refining sector anymore, and as such are not accountable to distribute their products through their own retail network. Thus, this would assist them to structure their channels in a better way to adjust to the changing market demand in the UK. Ross (2012) mentioned that this has been a major change in the business structure of the petroleum industry. Due to this new business firms with lesser financial resources have been able t enter the market. According to Mohanty et al. (2013), the emergence and growth of hypermarkets related to oil and gas retailing, have established different successful business models in this sector. Traditionally, oil companies used to be the leading entities in the oil and gas retail sector, but have lost a large market share in the recent times. Tesco has emerged as the biggest retailer in the fuel segments, offering discounts in fuel prices to consumers. Besides this, few oil companies have started to diversify and are focusing on oil and gas production. Results due to alterations in structure of the UK retail industry The number of traditional oil and gas companies has decreased significantly in the last five years. As such, the numbers of motor fueling positions have also reduced, with a declining rate of 11%. (Mitchell 2012) mentioned that motor fuel volume sold has been the highest in South East England followed by North West England and East of England. There were substantial variations in different regions in UK in terms of the decrease in PFS. Percentage wise Yorkshire and Humber( 33%) showed the largest variation, then London (32%) and South West England (31%) (Kelsey et al. 2014). Technological changes in the energy retailing sector According to Hauser (2016), the Industry Technology Faclitatior (ITF) is a non-profit organization, which assists the oil and gas sector entities in implementing technology initiatives to the UK oil and gas retail sector. ITF would assist the brad to look for further opportunities to explore oil and gas resources in the UK. In addition, Research Councils expertise and investment can be used to assist the UK oil and gas retail sector in research and development. In the area of shale gas, the British Geological Survey (BGS) is establishing techniques to develop oil and gas resources in UK (Raimi and Newell 2014). Yusuf et al. (2013) mentioned that specifically decided by the board members of ITF to introduce innovations in the area of petroleum retail industry. The technology goals at UK gas and retail sector remains to align operational activities with advance technology mechanisms. The PILOT initiatives at oil and gas sector relate to building superior infrastructure and effective exploration technologies, to assist the firm in further expansion policies (Devold 2013). Following are the technological goals that can be adopted to improve the existing business value of oil and gas sector in UK. Addressing related issues- Petroleum retail entities has realized the need to identify specific issues that have been hampering the growth of such brands. Technology has helped them to deal with such issues relating to accessibility and exploration of oil and gas fields globally (Yusuf et al. 2013). Consulting industry experts- Petroleum retail bards regularly consult industry experts in meeting technological demands of the industry. As such, major retail entities in UK industry meet industry experts regularly to discuss issues relating to technology. Industry Technology Facilitator (ITF) is also used for availing information and technology services (Davies et al. 2014). Effective usage of stewardship data Generally, Oil and gas retail supply chain entities have diverse business operations. As such, it becomes essential to monitor each business unit, and report to the management in case of any discrepancy (Mizgier and Arnez 2014). Thus, efficient technology is used to maintain smoother business operations globally. National centre of technology The business sustainability of the oil and gas industry mainly depends on its innovation in technology. Thus, it is essential that a centre of technology and research has been established which caters to the technological needs. This would assist business enterprises implement latest technological mechanisms to achieve further business growth. Carbon storage - Carbon storage techniques have evolved in the modern age, due to the wastage of oil and gas resources in the country. Brands like Tesco and Shell is using the technique of carbon capture and storage to deal with greenhouse gas emissions. Hems et al. (2013) mentioned that this would guard against 75-90% of carbon dioxide generated from a power plant from entering the atmosphere. In the current times, CSS power projects have been a relevant part in the effort to reduce carbon emission. Last year, the first large scale power sector CSR project became operational in Canada (Newell and Raimi 2015). The development and implementation of new technology in an important tool to sustain business in the challenging business environment of UK retail sector of gas and oil. Recent upgradations in technology have assisted oil and gas retail entities in achieving growth. Tesco has implemented a 4.5 billion-ridge project that consists of latest oil recovery mechanisms to add to produ ction levels. Statoil made a 4bn technology investment in Mariner, which is a valuable resource of oil field .It is expected that such emphasis in using technology in business operations, would assist brands in meeting expectations of valued clients. Influence of rising oil prices The following are the implications due to rise in price of oil Cost of transportation Expenditure in transportation and food rises as result of increase in the prices of oil. In addition, the cost of shipping also increases which directly affects the oil and gas retail sector in UK. Cost of fossil fuels- Manufacturing of natural gases also rise with an increase in the price of oil. Expenditure in relation to gas drilling and transportation leads to rise in the price fossil fuels. Besides this, cost of chemical products like asphalt which uses oil in is composition is affected. An oil price rise accompanied by recession - When oil price rise, generally consumers reduce spending on other sectors and, concentrate on keeping enough budget for food and gasoline for transportation. As such, sectors like hospitality and tourism suffer due to such extreme consumer reaction. Thus, oil price affect the market conditions to a large extent, leading to inflation Business sustainability - The petroleum retail sector is adversely influenced by rise in the prices of oil. Such period is characterized by terminating workers from jobs to get the supply and demand balance back into the market (Sueyoshi and Wang 2014). As such, these factors contribute towards negatively affecting the business sustainability of the brand. Disproportionate share of investment and resources- Increasing oil prices bring about a disproportionate share of investment and resources in the oil sector As such, consistently achieving growth becomes a difficult process. As such, it acts as barrier in delivering business performance of the brand Job Cuts and reducing investments The exploration and production of shale deposits is an important source of job growths, As such effective drilling is required in the manufacturing if shells. As such, rise in oil prices might influence the prices of shells, leading to less demand in the prices of goods. Thus business sustainability of this sector would be seriously hampered in the case if rise in oil prices. Increase in Demand for road fuels The transport sector in UK is a major determinant of the demand of petroleum products. According to DeLeire (2014), the demand has risen from 61% in the last year to 72% in the current year. The road transport remains the biggest consumer of petroleum products in UK. Conclusion With the changing market scenario, petroleum retail entities are facing innumerable challenges in the UK oil and gas industry. However brands like Tesco and re investing heavily in advanced technology mechanisms to embark in expansion policies. Besides this, these brands have to consider environmental degradation, and implement their production policies accordingly. To address this petroleum, retail entities have can adopt carbon storage facilities, to emit less carbon dioxide in the production process. Furthermore, with the changing structure there would be more intensive market competition in the UK petroleum industry, The rise in oil prices would make market survival more difficult, due to increasing production costs. Reference Hauser, S., 2016. Stakeholder influence and the diffusion of eco-efficiency practices in the natural gas exploration and production industry.International Journal of Energy Sector Management,10(1). Hems, A., Soofi, A. and Perez, E., 2013. How innovative oil and gas companies are using big data to outmaneuver the competition.A Microsoft white paper, pp.1-12 Kelsey, T., Partridge, M. and White, N., 2014.Unconventional Gas and Oil Development in the United States: Economic Experience and Policy Issues(No. 62154). University Library of Munich, Germany. Mitchell, J.V. and Mitchell, B., 2014. Structural crisis in the oil and gas industry.Energy Policy,64, pp.36-42. Mizgier, K.J. and Arnez, P., 2014. 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