Oil Services industry
The oil services industry plays a pivotal role in modern civilization. The industry can be divided into two sectors: upstream and downstream. Like all commodity based industries, oil industry also experiences periodic boom and busts.
The oil service industry is very large. Fossil fuels like oil, natural gas and coal make up more than 80% of total energy consumed across the globe. Oil itself supplies approximately 40% of global energy needs.
The oil industry consists of two prominent sectors: upstream and downstream. Upstream refers to process of extraction of oil and refining the oil for end use. Downstream is the commercial side of oil industry-like gas stations and retailing of oil.
The oil drilling and services industry is demarcated into two important areas: drilling and oilfield services.
Drilling companies extract oil from beneath the earth’s surface. It requires highly skilled personnel to do the work. Competent persons are few and in high demand. For this reason, a majority of oil companies are contractors who are hired by oil companies for a particular time period. Different types of rigs operate in different geographic conditions. For example, land rigs operate in drilling depths from 5,000 to 30,000 feet. Drill ships, on the other hand search the oceans in search of oil.
Oilfield service companies help the drilling companies to set up gas and oil wells. These companies are engaged in manufacturing, maintaining and repairing equipment employed in extraction of oil and its transport. Oilfield service companies perform tasks like transport services, directional services and seismic testing.
The oil refining industry is dominated by a few large companies. It requires heavy investment to set up an oil refinery. The substantial capital investment translates into fewer players. Like all commodity based businesses, the oil industry faces periodic boom and bust cycles. A rise in oil prices translates into greater profits. The converse, decrease in prices means lower margins from oil sales.