The Oil Industry - Essay Example

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The Oil Industry

This research will begin with the statement that the oil industry is not a modern development. It traces back its history to ancient ages. The only problem that has necessitated changes pertains to refinery and exploitation of oil. The modern oil industry emanated from an invention by Colonel Edwin Drake. It involved a steam-driven rig for drilling. This set up an expensive machine that most individuals could not be acquired. The only strategy was to harness resources for acquiring such machines. The machines became more expensive to acquire as time progressed since the demand for oil necessitated very quality product. The first companies progressed to attain revenues that offset their high costs. In this sense, they became monopolies. The main reason of monopoly pertained to the fact that it was becoming difficult to attain the minimum efficient scale.  The established companies were experiencing economies of scale. However, this trend stalled on the formation of unions such as oligopoly.  The OPEC was composed of Middle East Asia countries and Venezuela. They emerged to form a substantial influence on the market. In spite of the fact, oil was a unique product, it could be refined to several products. These products helped create companies such as shell and BP who later influenced entry of other companies. In spite of the domineering presence of unions such as OPEC, prices usually shift in response to notable factors ...Show more

Summary

The researcher aims to focus on the level of BP and Shell in order that an accurate analysis becomes possible. From the study, it is vital to note that many companies are conducting oil exploration that could see the industry change to a monopolistic competition scenario.

Author : princess32
The Oil Industry essay example
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