PESTEL Analysis for Oil and Gas Industry Sample Essay

PESTEL Analysis for Oil and Gas Industry

There are vast areas that PESTEL analysis can aid, but they work substantially if looking forward to invest in a large company. Oil and gas industry is one of the great investments that guarantee good income and came be a success if proper PESTEL analysis is conducted. Energy resources have always been significant for human and industrial consumers and their demand has affected the market in many ways.

The PESTEL analysis saves the day as it embodies the matchless roles the oil and gas industry has on political, economic, social and technological systems on the global platform. In essence, there are many benefits of external factors of macro-environment on the oil and gas industry and other related industries. PESTEL analysis helps an organization to easily identify the factors of the market that could influence one’s success in the industry.

This is because of the high demand for energy resources in the running of many political, socio-economic, technological and environmental activities. Here is how to easily conduct PESTEL analysis if ready to prosper in the oil and gas industry.

  1. Political factors– These are factors which express the impact of political entity on a business venture. These refer to government policies that govern the energy industry and can include the degree of intervention in the economy. It is wise to consider what products and services a government is more than willing to provide. Political decisions have effect on many vital areas when it comes to oil and gas business like workforce, quality of infrastructure like rail and roads and health of nation.
  2. Economic factors– Higher interest rates may daunt investors as cost of borrowing will increase. A strong currency will also make it costly to export more oil and gas due to increase in prices on the foreign market. In case of inflation, it may lead to higher wage demand from employees increasing the cost of the products. Higher income growth will boost demand for oil and gas products.
  3. Social factors– These factors express demography, culture, religion, income migration, migration and ideological views on an issue. Globally, there is no culture or mores which are against oil and gas products. Every part of the world see the oil and gas industry as the future to development and improved living standards.
  4. Technological factors– They are represented by technologies, methods and unique techniques that impact activities within an organization. Technologies offer oil and gas industry to create new products and come up with better processes. Through technology, the cost of marketing and advertising has reduced incredibly.
  5. Environmental and legal factors– Entrepreneurs looking forward to invest in the oil and gas industry have to be well-versed with environmental factors that influence every oil production or distribution activities. Geographical position, land form, climate, rock structure and fauna and flora influence oil and gas industry activities. More so, they need to be aware of the legal factors represented by laws, norms, constitution and regulations of local authorities, government and international platform that control oil and gas industry activities.

It is essential to understand the macro-environment prior to investing in the oil and gas industry. This industry is vital for modern day economy. Despite new forms of energy in the market, oil and gas products will always remain essential. Thus, governments and international communities need to combat the negative effects of oil and gas industry and focus on how to utilize the many merits presented by the industry.

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