Why big oil is beefing up its trading arms
Big oil is no enemy to the idea of making money. While the traditional method of extracting and selling crude oil is still the primary goal for the industry, more and more oil companies are exploring other ways to make more money and increase their profits. One area they have been beefing up in recent years has been oil trading. In this article, we’ll be looking at why the big oil companies are investing so much in oil trading and what it means for their bottom line.
1. Big Oil’s Growing Global Appetite
Big oil corporations continue to rise to global domination, consuming resources and expanding their influence to capture a piece of the global market. To some, their presence reflects the world going through a massive transformation as infrastructure is built and oil resources tapped. To others, these operations symbolize the lack of control communities have over their local environment.
The industry’s tentacles reach far and wide, ranging from small investments to large-scale projects. They’re buying and selling projects, locking up oil and gas resources, and taking advantage of government policies on production. As they ramp up their activities, they increase their power, not just in terms of their bottom lines but also in terms of people’s lives. To address this, civil society is pushing back against Big Oil’s rise to prominence, focusing on environmental sustainability and community empowerment, signifying a watershed moment for the industry.
- Continuing to purchase projects
- Expanding their global presence
- Becoming more influential in communities around the world
- Civil society pushing back and raising awareness about environmental sustainability
2. How Trading Arms are Driving Profits
High stakes international trade deals are often shrouded in secrecy, leaving questions unanswered. On the one hand, governments have traditionally used weapons as a resource of last resort in conflict resolution. On the other hand, trading arms has become an important way for leading nations to increase their economic growth.
The buying and selling of guns, tanks, and warplanes has exploded in recent years. Commercially available arms are worth tens of billions of dollars, with 7 of the world’s top 10 arms dealers in the US and Europe. Meanwhile, developing countries have become a lucrative market for weapons manufacturers due to their need for defense systems.
- Profits – Arms trading is making an increasingly large contribution to global profits. Major governments are increasingly investing in weapon production as a way to boost their annual budget.
- Conflict – The increase in arms trading has the potential to create global issues, as more weapons are available to those who are unstable, war-prone, or corrupt.
- Regulation - Concerns raised about arms trading have led to measures and regulations meant to prohibit weapon trading in particular countries. However, such regulation is hard to enforce.
3. Challenges of High-Risk Trading
High risk trading can provide lucrative returns but it is not without its share of challenge. Managing investments while taking on high levels of risk requires proper analysis, preparation, and discipline.
- Volatility: The price of high risk investments can be highly volatile, which can quickly cause losses to pile up if the investor is not cautious. Since market conditions can change at a moment’s notice, the investor must remain focused on market trends to ensure they don’t suffer from large losses.
- High Fees: Risky investments generally come with associated fees that can be relatively costly. When investing in high risk stocks, the investor is responsible for paying fees such as brokerage commissions, slippage fees, etc. out of their own pocket.
- Market Volatility: The market is known to be unpredictable, manoevering through trends, corrections, bear markets, and bull markets. This can make it difficult to know when is the best time to sell or buy a stock and can put the investor in a difficult situation.
High risk trading can be a profitable endeavor, but it requires the investor to be mindful of market forces and prepare for any possible clash between their investments and the market. Knowing the potential risks and understanding potential outcomes can go a long way in helping the investor make the most of their investments.
4. The Impact of Increased Oil Trading
In today’s economy, the increased trading of oil has had a major influence on the global energy industry. The following points will consider some of the key effects of greater oil trading.
- Growing Demand – The emergence of growing economies has led to increased energy demands for oil. This has lead to a strengthening of the oil market as more traders look to join and take advantage of the lucrative business opportunities.
- Increased Production – Higher production rates for drilling and extracting oil from the ground have become available as technological advancements have been made. This has lead to the mass production of more cost-effective resources.
At the same time, increased oil trading has had global implications for the environment. From increased emissions to deforestation, the effects of increased oil production and increased demand on the planet can have severe consequences. However, through sustainable practices and increased awareness, it is possible to reduce these impacts and become healthier citizens of this earth.
As the changing landscape of the energy markets continues to evolve, many eyes in the industry are on the moves being made by Big Oil’s trading arms. By beefing up their trading arms, Big Oil is ensuring that it can remain a dominant force in the global energy market by diversifying its portfolio into the new and potentially lucrative opportunities the market has to offer.