Here’s a look at how oil prices affect companies in the oil industry’s value chain
Crude
oil prices seem to be the single most important determinant of oil companies’
performance. For this article, we ran some tests to find the correlation
between Brent Crude prices and a few general performance indicators for oil
companies. We found that oil prices do indeed affect oil companies’ performance
to a great degree, but the extent to which they do so depends greatly on the
companies’ positioning in the industry’s value chain.
For
future reference, here’s a brief look at the how the industry is broadly
categorized:
- Exploration and Production (E&P) oil companies, which explore oil reserves and produce crude oil.
- Refining and Marketing (R&M) companies, which refine crude oil and market it to end consumers.
- Integrated Oil Companies (IOCs), which are involved in everything from the exploration and extraction activities, to transportation and marketing.
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