Think of the following situation: Demand for Oil is down and Supply of Oil is up with the threat that supplier groups (ex. OPEC) may reduce supply. Identify industries where this situation represents an opportunity and where this represents a threat. Justify your position.
Industry where this scenario represents opportunity
Industry where this scenario represents a threat
| Industry where this scenario represents opportunity | Industry where this scenario represents a threat |
- Threat of OPEC nations reducing supply can possibly give the oil exploration industry more opportunities to grow.
- Low demand, and higher supply may lead to lower oil processes, which may cause an intermittent push for automobile sales
- The electronic vehicle industry will witness a push with fluctuation in oil supply and demand, with threat of OPEC nations
- Lower oil prices will cut down transportation costs, which may bring down the cost of goods where logistics is a primary cost factor. One example can be Cement industry.
| - Oil tankers: Since the demand is down, their transport business will come down and oil tankers cannot be potentially used for transporting anything else. So, they will have unused capacity lying.
- Oil distributors: Since the demand is down, and supply is high, they will have to deal with prices coming down. Additionally, they will also deal with increasing amount of inventories that will have its own costs.
- Refineries: Since the demand is down, they will not be operating at their peak capacity. Which leads to operational cost per unit of oil processed higher.
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