Increasing pressure on the resource, and factors to its production, however, identifies concerns over trends in its future market. These lead to the question, ‘how will the crude oil industry affect our country’s economy and households’ livelihoods in the year 2020?’
Trends in the crude oil industry identify many uncertainties, both short term and long term. Seasonal weather conditions that affect energy consumption levels in traveling and heating determines variable demand levels and prices of crude oil. Adverse weather phenomena such as hurricanes also hamper production process to influence supply, and subsequently price of crude oil. Other factors that influence trends in the industry include resolutions by OPEC, production cost, and technological developments for the industry’s applications. Increasing demand for oil by emerging Asian economies such as China and India is another driver to the industry’s trend (Nrcan 2010). Similarly, increasing global demand for oil indicates future demand concerns (Opec 2012).
The industry’s critical uncertainties are demand and adverse weather conditions. Demand has a high potential level because it dictates the industry’s quantity of production and influences prices at given supply capacities. It is however uncertain because of possible changes such as the emergence of expanding economies and development of alternative sources of energy. Adverse weather conditions also dictate the ability to mine crude oil and are highly unpredictable, being natural conditions (Nrcan 2010; Opec 2012).
Demand for crude oil identifies two extremes, high demand relative to supply and low demand relative to supply while weather conditions identify existence of adverse weather conditions and favorable weather. The two factors generate four scenarios as shown below (Burt 2006).
A favorable condition will occur under high demand for crude oil and simultaneous favorable weather conditions. This would mean an active economy that utilizes energy for production activities and household needs. Availability of oil due to good weather would also mean sufficient supply and consequently favorable prices.