Term paper

Business environment
Pestle analysis of oil and
petroleum industry

Submitted to:- Submitted by:-

Ms.Impreet kaur Shikhar Verma
A-26
M.B.A(1st sem)
10904683
 2009-11

ACKNOWLEDGEMENT

No serious and lasting achievement or success one ever achieves without the
friendly guidance and co-operation of so many people involved in work.
Foremost of all, I express my gratitude to the Almighty for his blessings and for
vesting wisdom in all my wishes.
I am also thankful to my Subject Teacher Ms.Impreet kaur , who has helped me a
lot each and every time when I had some difficulty. Words are not sufficient to
register my sincere regards to my loving parents for their deep affection and
unabated inspiration that really kept me going. They were and unending source of
strength and perseverance during the course of the study. I place my thanks to all
those who spared their time and made it convenient for me to complete the
research. I deeply acknowledge their concern for my research. Last but not the
least, I also wish to red cord my gratitude for any person(s), my memory has failed
to recall, who rendered his/her/their support and services.

Yours faithfully

Shikhar verma
 Introduction
PEST analysis stands for "Political, Economic, Social, and Technological
analysis" and describes a framework of macro-environmental factors used in the
environmental scanning component of strategic management. Some analysts added
Legal and rearranged the mnemonic to SLEPT; inserting Environmental factors
expanded it to PESTEL or PESTLE, which is popular in the UK. The model has
recently been further extended to STEEPLE and STEEPLED, adding education
and demographic factors. It is a part of the external analysis when conducting a
strategic analysis or doing market research, and gives an overview of the different
macro environmental factors that the company has to take into consideration. It is a
useful strategic tool for understanding market growth or decline, business position,
potential and direction for operations.
The growing importance of environmental or ecological factors in the first decade
of the 21st century have given rise to green business and encouraged widespread
use of an updated version of the PEST framework. STEER analysis systematically
considers Socio-cultural, Technological, Economic, Ecological, and Regulatory
factors.

 Political factors, are how and to what degree a government intervenes in the
economy. Specifically, political factors include areas such as tax policy, labour
law, environmental law, trade restrictions, tariffs, and political stability.
Political factors may also include goods and services which the government
wants to provide or be provided (merit goods) and those that the government
does not want to be provided (demerit goods or merit bads). Furthermore,
governments have great influence on the health, education, and infrastructure of
a nation.

 Economic factors include economic growth, interest rates, exchange rates

and the inflation rate. These factors have major impacts on how businesses
operate and make decisions. For example, interest rates affect a firm's cost of
capital and therefore to what extent a business grows and expands. Exchange
rates affect the costs of exporting goods and the supply and price of imported
goods in an economy
 Social factors include the cultural aspects and include health consciousness,
population growth rate, age distribution, career attitudes and emphasis on
safety. Trends in social factors affect the demand for a company's products and
how that company operates. For example, an ageing population may imply a
smaller and less-willing workforce (thus increasing the cost of labor).
Furthermore, companies may change various management strategies to adapt to
these social trends (such as recruiting older workers).

 Technological factors include ecological and environmental aspects, such as

R&D activity, automation, technology incentives and the rate of technological
change. They can determine barriers to entry, minimum efficient production
level and influence outsourcing decisions. Furthermore, technological shifts can
affect costs, quality, and lead to innovation.

 Environmental factors include weather, climate, and climate change, which

may especially affect industries such as tourism, farming, and
insurance.Furthermore, growing awareness to climate change is affecting how
companies operate and the products they offer--it is both creating new markets
and diminishing or destroying existing ones.

 Legal factors include discrimination law, consumer law, antitrust law,

employment law, and health and safety law. These factors can affect how a
company operates, its costs, and the demand for its products.
 The model's factors will vary in importance to a given company based on its
industry and the goods it produces. For example, consumer and B2B
companies tend to be more affected by the social factors, while a global
defense contractor would tend to be more affected by political factors.
Additionally, factors that are more likely to change in the future or more
relevant to a given company will carry greater importance. For example, a
company who has borrowed heavily will need to focus more on the
economic factors (especially interest rates).
 Furthermore, conglomerate companies who produce a wide range of
products (such as Sony, Disney, or BP) may find it more useful to analyze
one department of its company at a time with the PESTEL model, thus
focusing on the specific factors relevant to that one department. A company
 may also wish to divide factors into geographical relevance, such as local,
national, and global (also known as LoNGPESTEL).

Political factors

Crude oil is one of the most necessitated worldwide required commodity. Any
slightest fluctuation in crude oil prices can have both direct and indirect influence
on the economy of the countries. The volatility of crude oil prices drove many
companies away. Therefore, prices have been regularly and closely monitored by
economists. Now a days prices have shoot up to record levels of USD 125 per bbl.
This is an increase of nearly 70% from that of the previous year. The consumption
level of oil is projected to be rise by 1.2 million bbl/d in the year 2008. The
consumption of China is presumed to be rise by 0.4 million bbl/d in current year,
as it has already registered an increase of 0.8 million bbl/d in march.

Crude oil prices act like any other product cost with more variation taken place
during shortage and excess supply. Studies have conducted to analyze the impact
of rise in crude oil price to the economic growth in the OPEC (Organization of
Petroleum Exporting Countries) countries. It has been observed that $10 in the
crude oil price means decrease in the economic growth of the OPEC countries by
0.5%. This rise in prices account to have more influence on the economic
condition of developing countries.

Any massive increase or decrease in crude oil has its impact on the condition of
stock markets in throughout the world. The stock exchanges of every country keep
a close eye on any up and downward movement of the crude oil price. India fulfills
its major crude oil requirements by importing it from oil producing nations. India
meets more than 80% of its requirement by importing process. Therefore, any
upward and downward motion of prices are closely tracked in the domestic
marketplace. Many times it has been recorded that prices of essential products like
crude also acts as a prime driver in becoming reason of up and down movement of
price.

Keeping in view the conditional status of present scenario, most of the observers at
the international arena is much more interested in knowing the current oil price and
the outcome of this price burst. These has become a hot bound question in all over
world. There tend to be exist two schools of thought. One side argues that high
prices are cyclical and arise due to the coincidence occurrence of potentially
reversible factors which all are going in the same direction. But the other school of
thoughts opine that there is a fundamental structural change in the oil market
which is pointing towards the shortage of investment from a decade. Both the
thoughts are important. As if the prices are cyclic in nature, there result will not
exist forever but if they are structural then they will tend to be stay for a longer
time period.

Any fluctuation in crude oil affects the other industrial segments also. Higher
crude oil price implies to the higher price of energy, which in turns negatively
affects other trading practices that are directly or indirectly depends on it. Crude
Oil has been traded in throughout the world and there prices are behaving like any
other commodity as swinging more during shortage and excessiveness.

In the short term, price of crude oil is influenced by many factors like socio and
political events, status of financial markets, whereas from medium to long run it is
influenced by the fundamentals of demand and supply which thus results into self
price correction mechanism.

This sustained movement in the northern side underlines some of the fundamental
changes in the marketplace. On the demand supply, where in the past the more and
more consumption was come from the OPEC countries, especially the US but in
today's date much of the incremental demand flow is from emerging economies.
Particularly China and India which have recorded more than 40% contribution in
the incremental global consumption during the time period of 2000-06.
International price of crude oil is projected to shoot up to 100 million barrels per
day by 2015.

While demand may touch to a great height, supply will juggle to keep up the pace.
The production from existing sources has been reduced by 4% per annum, which
implies that around 3 million barrels per day of new capacity is required to be
added in every year for offsetting this declination.

There are innumerable factors which influence the price movement of crude oil in
throughout the world. Like methods and technology using for increase the oil
production, storing up of crude oil by rich and prosperous countries, changes
introduced in tax policy, social and political issues etc. In recent years many
factors have emerged as the key figures in influencing the price index of crude oil
in throughout the world.

The crude oil prices have been buffeted by many factors, which are
summarized as below -

• Production: The OPEC nations are the major producer of world's crude oil.
Therefore, every policy made by such countries related to the crude oil
prices have their influence on crude oil prices. Any decision taken by OPEC
nations for increasing or decreasing production of crude oil impacts the price
level of crude oil in international commodity markets.
• Natural Causes: In recent years, global community have witnessed many
events which in turns have volatility effects on the price level of crude oil.
Like hurricane katrina and other type of tropical cyclone have hit the major
portion of globe, which as a result driven the crude oil prices to reach at its
peak.
• Inventory: In throughout the world, oil producers and consumers get stock
their crude oil for their future requirements. This gives rise to speculation on
price expectations and sale/arbitrage chances in case any unexpected thing
cracks during supply and demand equations. Any upward or downward
movement in inventory level shoots up volatility in price index of crude oil,
which generates lot of changing movement in sensex.
• Demand: With a sharp rise in economic demand, requirement of crude oil is
increasing to manifold in context to the limited supply. The high demand
economies of crude oil is putting undue pressure on the available fixed
 resources. The major gap created between demand and supply of crude oil is
forcing the price curve of crude oil to rise in upward direction.

The price structure of crude oil is also influenced by the cyclical pattern. It has
been observed that requirement of crude oil got increased during summer season in
comparative to the winter season. As any dip in the seasonal temperature increases
the consumption of energy for heating purpose in many cold nations. Demand
shoots up and thus generates the requirement of tapping the inventories. Similarly,
in summer, supply exceeds the demand and petroleum inventories are build up for
storage purpose. Henceforth, crude oil prices drop.

Economic factors

paper is about the Indian petroleum refining industry. But this industry is
extremely open; trade flows are large compared to production. And there is
considerable overlap between oil production and refining internationally, and to
some extent in India. So we begin with a brief discussion of the international
petroleum industry and its components – refining being one of them.
Petroleum is extracted from underground reserves; then it is cracked or “refined”
into end products for various uses. The petroleum industry thus has two parts: an
oil exploration and production industry upstream and a refinery industry
downstream. Most oil producers also own refineries. But the reverse is not true; a
high proportion of oil is sold to refinery companies that do not produce crude oil.
Sedimentary rocks in which hydrocarbons are trapped often hold gas, sometimes in
association with crude oil and sometimes alone. It consists mostly of methane,
which is lighter than air and toxic. It therefore requires airtight tanks for storage
and similarly leak-proof pipes or trucks for transport, which raise its capital costs.
Associated gas was flared in early years of the industry; it is still flared at remote
or minor wells where the cost of its collection and transport would be high, or
often reinjected into the oilfield to maintain pressure which forces oil up to the
surface. But where the quantities are large enough, natural gas is mined and traded.
It is mainly used as an industrial, domestic and vehicular fuel.
Motor vehicles run almost exclusively on petrol and high-speed diesel oil, both
fuels derived from mineral oil – although they can be modified to run on certain
biofuels. Vehicles are so widely dispersed that they require an extensive
distribution system for these two refinery products. As motor vehicle use has
spread across the world, it has brought along with it petrol pumps, logistics,
storage and supply of fuels. There is thus a third part of the petroleum industry
downstream from refineries which distributes the products. It is owned by
refineries in most countries. But this is not inevitable. Some countries have
distribution chains that are independent of producers and refiners; and in countries
which do not have refineries, distribution is undertaken by either local or foreign
oil companies.
Oil has collected in pools and seeps for thousands of years. The Chinese are
recorded as having extracted oil from wells 800 feet deep through bamboo pipes in
347; they used it to evaporate brine and make salt. American Indians used to put it
to medicinal uses. Persians, Macedonians and Egyptians used tars to waterproof
ships. Babylonians used asphalt in the eighth century to construct the city’s walls,
towers and roads. But the easily available oil was not put to any mass use because
the crude itself was not a good fuel; it gave out much soot and smoke. A
distillation process using a retort was invented by Rhazes (Muhammad ibn
Zakariya Razi) in Persia in the 9th century; liquid heated in it vapourized, passed
through a curved spout and condensed in another container. The process could be
used to make kerosene; but it was more often used to make alcohol and essence of
flowers for perfume. It was a batch process, its fuel consumption was high, and it
was not equally efficient at distilling kerosene from all crudes.
A more efficient and reliable distillation process came out of a series of inventions
after 1846. The last invention was the invention of oil fractionation in 1854 by
Benjamin Silliman, a professor of science in Yale. It used a vertical column which
separated components more efficiently, and which could be used continuously.
Oil was first produced in Titusville, Pennsylvania (USA) in 1859 by one Edwin L
Drake, who refined it into kerosene, which was then used as an illuminant.
Electricity did not emerge as an illuminant till the Edison Electric Light Company
was founded in 1878. Well into the 20th century, kerosene, gas and electricity
continued to compete as illuminants. Whilst the use of gas as an illuminant has
virtually disappeared, a large population, especially in India, continues to use
kerosene as illuminant.
The invention of the motor car by Karl Friedrich Benz in 1885 created a market for
petrol, a new refined product (petrol is called Benzin in Germany, but is not named
after Karl Benz). In 1898, Rudolf Diesel invented an engine in which oil was
ignited by compression; the diesel engine he invented came to power larger
vehicles, principally trucks and buses. Diesel engines used a different fuel, which
was named diesel oil. After this, the production and use of motor vehicles spread
rapidly in the United States, especially after 1908 when Henry Ford began mass
manufacture of his Model T; and petroleum and diesel oil became the most
important refined products, first in the US and progressively across the world.
However, only a certain proportion of crude oil can be converted into motor fuels.
The demand for kerosene, the original distillate extracted from crude oil, has gone
down with the spread of electricity. So other refined products have been
developed, and non-vehicular uses developed for them. Some of the products differ
little from motor fuels; for instance, naphtha, extensively used to make nitrogenous
fertilizers and chemicals, is little different from petrol; and jet fuel is very similar
to kerosene. Thus, refineries find markets for their products in many industries
other than motor transport .
The Industry in India
India imports three-quarters of the crude it refines. It exports refinery products ; its
net exports are roughly ten per cent of production. The government operates an
elaborate set of cross-subsidies to insulate domestic from international prices; such
cross-subsidies have serious effects on the finances of the Indian companies
involved, and influence competition amongst them. The oil companies, both public
and private, are so large a part of the economy that the cross-subsidy regime
cannot be sustained in all circumstances; sooner or later, the government has to
bring domestic prices closer to international prices. Hence the state of competition
in the international market and international prices are important for the domestic
market.
I give an introduction to refinery technology, products, and the markets they serve.
In ,briefly describe the global exploration, production and refining industries. In,
we describe the Indian market structure in terms of the companies operating in it,
their products and markets. In outline the market structure in exploration and
production, user industries, refining and gas respectively. In, turn to the major
barriers to competition and to the steps that need to be taken if greater
India’s economic growth is contingent upon the growth of the Indian steel
industry. Consumption of steel is taken to be an indicator of economic
development. While steel continues to have a stronghold in traditional sectors such
as construction, housing and ground transportation, special steels are increasingly
used in engineering industries such as power generation, petrochemicals and
fertilisers. India occupies a central position on the global steel map, with the
establishment of new state-of-the-art steel mills, acquisition of global scale
capacities by players, continuous modernisation and upgradation of older plants,
improving energy efficiency and backward integration into global raw material
sources.
Steel production in India has increased by a compounded annual growth rate
(CAGR) of 8 percent over the period 2002-03 to 2006-07. Going forward, growth
in India is projected to be higher than the world average, as the per capita
consumption of steel in India, at around 46 kg, is well below the world average
(150 kg) and that of developed countries (400 kg). Indian demand is projected to
rise to 200 million tonnes by 2015. Given the strong demand scenario, most global
steel players are into a massive capacity expansion mode, either through
brownfield or greenfield route. By 2012, the steel production capacity in India is
expected to touch 124 million tonnes and 275 million tonnes by 2020. While
greenfield projects are slated to add 28.7 million tonnes, brownfield expansions are
estimated to add 40.5 million tonnes to the existing capacity of 55 million tonnes.
Steel is manufactured as a globally tradable product with no major trade barriers
across national boundaries to be seen currently. There is also no inherent resource
related constraints which may significantly affect production of the same or its
capacity creation to respond to demand increases in the global market. Even the
government policy restrictions have been negligible worldwide and even if there
are any the same to respond to specific conditions in the market and have always
been temporary. Therefore, the industry in general and at a global level is unlikely
to throw up substantive competition issues in any national policy framework.
Further, there are no natural monopoly characteristics in steel. Therefore, one may
not expect complex competition issues as those witnessed in industries like
telecom, electricity, natural gas, oil, etc.
This, however, does not mean that there is no relevant or serious competition issue
in the steel industry. The growing consolidation in the steel industry worldwide
through mergers and acquisitions has already thrown up several significant
concerns. The fact that internationally steel has always been an oligopolistic
industry, sometimes has raised concerns about the anti-competitive behavious of
large firms that dominate this industry. On the other hand the set of large firms that
characterize the industry has been changing over time.
Trade and other government policies have significant bearing on competition
issues. Matters of subsidies, non-tariff barriers to trade, discriminatory customs
duty (on exports and imports) etc. may bring in significant distortions in the
domestic market and in the process alter the competitive positioning of individual
players in the market. The specific role of the state in creating market distortion
and thereby the competitive conditions in the market is a well-known issue in this
country.
This report proceeds as follows.
Section 2 of the report provides a brief over view of the performance and structure
of the Indian steel industry by analysing published secondary time series data on
certain key indicators. Market structure is analyzed using indicators such as
number of players and their respective shares in total production, share of public
and private players in the total production/sales, production capacity of major
players, etc. Given the heterogeneous nature of the product this analysis is done for
the various segments of steel that constitute the “relevant market”. This analysis is
a precursor in identifying segments where competition may be an issue of concern
to allow for a pointed analysis. The report documents policy and institutional
structure governing the steel industry in India and the role played by the
Government in the development of this industry.
The report examines issues of competition of steel industry in India, by identifying
the structurally inherent and the market determined positions of various steel firms
specifically to see their market power, vis-à-vis both their final consumers as also
those within the steel industry. The issues emerging out of the size and market
shares, specifically taking into consideration the investment aspects are also
discussed in this section. The other issue of significant importance in the context of
competition is the command over natural resources that a few players possess and
that enable a significant cost advantage over the rest in the market. These are the
result of government policies of the past, to support growth of a particular industry.
These preferential policies and their impact on competition are also analysed in
this section.
Concludes with a discussion on state of the competition in the Indian steel sector
pointing to a few key recommendations for the Competition Commission of India.
Provide data on the sector, and briefly discuss international conditions, and
provide an historical overview.
In Brief
This study finds little evidence of any cartelization or joint pricing behaviour on
the part of the incumbents. It finds that government intervention, and slow
responsiveness to changing conditions has contributed to shortages in the past,
which in turn leads to action by the incumbents that look like, but is not, anti-
competitive behaviour. Unequal access to raw material, as well as export/import
curbs, are the key issues affecting the creation of a level playing field. It is the last
two as well as ready availability of information on costs and prices across the value

Technological effects

Timely, hands-on guide to environmental issues and regulatory standards for the
petroleum industry
Environmental analysis and testing methods are an integral part of any current and
future refining activities. Today's petroleum refining industry must be prepared to
meet a growing number of challenges, both environmental and regulatory.
Environmental Analysis and Technology for the Refining Industry focuses on the
analytical issues inherent in any environmental monitoring or cleanup program as
they apply to today's petroleum industry, not only during the refining process, but
also during recovery operations, transport, storage, and utilization. Designed to
help today's industry professionals identify test methods for monitoring and
cleanup of petroleum-based pollutants, the book provides examples of the
application of environmental regulations to petroleum refining and petroleum
products, as well as current and proposed methods for the mitigation of
environmental effects and waste management.
petroleum technology, refining, and products, and reviews the nomenclature used
by refiners, environmental scientists, and engineers. environmental technology and
analysis, and provides information on environmental regulation and the impact of
refining.
Coverage includes:
* In-depth descriptions of analyses related to gaseous emissions, liquid effluents,
and solid waste
* A checklist of relevant environmental regulations
* Numerous real-world examples of the application of environmental regulations
to petroleum refining and petroleum products
* An analysis of current and proposed methods of environmental protection and
waste management

Efficient reliable and competitively priced energy supplies are prerequisite for
accelerating economic growth. India is currently world’s fifth largest consumer of
energy accounting for 3.9% of world’s annual energy consumption. USA, China,
Russian federation and Japan are the top four consumers. India’s import
dependence on crude oil and petroleum products is more than 70%. Realization of
high economic growth aspirations by the country in the coming decades, calls for
rapid development of energy market.

The India Hydrocarbon Vision-2025 report, which encapsulates Government’s

long-term policy for this sector enunciate therein the long-term policy covering
exploration, refining, marketing infrastructure, gas and all other related matters in
the hydrocarbon sector. The national endeavor is to bridge the ever-increasing gap
between demand and supply of petroleum products in India by intensifying
exploratory efforts for oil and gas in the Indian sedimentary basins and abroad
supported by other alternative sources of energy like Coal Bed Methane (CBM),
Gas Hydrates, Coal Liquefaction, Ethanol and Bio-diesel etc.
 New Exploration Licensing Policy (NELP), over the last 6 years there has been a
significant growth in E&P activities in India. There have been several successes.
These finds will require state of the art technologies to extract the hydrocarbons as
well as highly skilled and competent professionals to manage the industry. The
E&P industry today is using cutting-edge technologies to locate hydrocarbons and
optimize efficiency in production. These technologies include the use of complex
reservoir modeling and simulation, nuclear magnetism, sonic & ultra-sonic
technologies, magnetic resonance, advanced chemical engineering, fluid
mechanics, telecommunication, process engineering etc.

As “easy oil” has become a thing of the past, the industry is moving towards
frontier areas to increase production. The high value of the end product has led to
significant technological developments to tap resources in offshore environs of
deep and ultra deep water (from 300-3500 meter water depth).Heavy oil consists of
over 40% of the hydrocarbon resources in the world. This oil does not flow at
surface conditions. Optimizing the recovery of hydrocarbons from existing
producing fields (called “brown fields”) remains an existing challenge. Current
recovery rates in India need considerable enhancement. These are just some
examples of the E&P challenges that are found in India and an opportunity for the
use of state of the art technologies and developing manpower for meeting these
challenges.

II. Industry – Academia Interaction:

2.1 All the above endeavor require highly skilled and competent professions.
PetroFed projected a need by 2012 for 8000 additional skilled professionals
annually in the Indian E&P sector, the current capacity for new graduates in
Petroleum Related Geo-sciences is about 450.

2.2 In March, 2005 and January, 2006 brainstorming sessions were held to
identify gap in demand and supply of petroleum personnel in India. Accordingly,
Petrofed was authorized to conduct a study in this regard. Petrofed engaged the
services of Price Waterhouse Coopers (PwC). The study conducted by PwC
recommended action points for Government organizations and education sector
along with suggestions for the way forward.

2.2.1. Action points for Government:

(i) Increase number of talents available to the E&P sector.
(ii) MOP&NG may implement a plan to communicate the
attractiveness of the industry say a “Go Explore” campaign where students right ,
hear and understand about career opportunities in the E&P sector.

(iii) MOP&NG and M/o HRD may set up a joint committee to monitor and
address the talent requirements of the industry – Course and curriculum may be
reviewed and infrastructure may be planned to provide higher quality of education.

Action points for Organizations:

(i) A higher degree of collaboration between the industry and educational
institutions.
(ii) Joint committee to take up manpower planning issues and Institute
Industry – Academia Interface.
(iii) Plan sector specific programmes like workshops, seminars, technical
contests etc.
(iv) A communication campaign aiming to draw young talent to the E&P
sector.
(v) Utilization of retired/retiring professionals as mentors/trainers to enable
transfer of knowledge.
(vi) Adoption of college going students at entry level to nurture their growth
and readiness for the industry.

Action points for the Education Sector:

(i) Expansion of training programmes to address immediate and emerging
skills shortage.
(ii) Orientation of students to prepare prospective employees for careers in the
oil and gas industry.
(iii) Expansion of current initiatives to achieve an appropriate level of applied
research programmes.
(iv) Expansion of current intake in E&P related courses as well as set up new
courses.
(v) Increasing the level of common industry standards for vocational training
across India.
(vi) Establishing feedback mechanism for infrastructure, curriculum and
faculty.
(vii) Indian Institutes may plan catering to the global opportunities.
The way forward:

• The Central Government has set up Rajiv Gandhi Institute of Petroleum

Technology (RGIPT), a center of excellence, catering to the needs of Oil &
Gas Industry with effect from Academic Session, 2008-09.
• State owned Gujarat State Petroleum Corporation has promoted the Gujarat
Energy Research & Management Institute (GERMI).
• These will start contributing to the industry over the next 3-5 years.
• University of Petroleum and Energy Studies, Dehradun, can provide
additional tailor made programs for Oil & Gas Industry.
• MOP&NG has also decided to review the steps and initiatives undertaken by
the industry to address the talent scenario by bringing it under the purview
of QPR (Quarterly Performance Reviews) with effect from April, 2007.
• Build the attractiveness of the E&P Sector to assure inflow of quality talent.
• “Go Explore” and other brand building campaigns for Oil & Gas Sector.
• Set-up and institutionalize the industry – academia interface.
• HR Systems (such as training, career planning, compensation and retention)
in Oil & Gas Companies need to be made more effective and monitored on
an ongoing basis.

Social effects

The carrying capacity is the number of individuals that an area can support without
sustaining damage. Carrying capacity is exceeded if so many individuals use an
area that their activities cause deterioration in the very systems that support them.
Exceeding the carrying capacity sometimes harms an environment so severely that
the new number who can be supported is smaller than the original equilibrium
population. The carrying capacity would then have declined, perhaps permanently.

Any number of elements or systems can be hurt by overuse. A field can be grazed
down until the root systems of grasses are damaged; or so much game can be
hunted off that food species are effectively extirpated. Now, the foragers that ate
the grass or the predators that killed the game have lost a food source. In effect, the
carrying capacity has been exceeded so that the population dependent on the area's
productive systems is worse off than it was originally.
Animal populations that destroy their niche come and go. If not too many
examples come to mind, it is because they rather quickly go. The miniature ponies
on Assateague Island illustrate a point on the continuum. They would overgraze
their island, seriously depleting their future food supply, except for the fact that a
portion of each year's colt crop is removed. Without human intervention (there are
no predators and apparently no reservoir of infectious disease), the pony
population would explode. Probably it happened in the past. Their very small size
today is a vestigial effect of starvation, when only the tiniest, for whom the least
blades of grass were lifesaving, survived.

A population cannot be stable if, by its size or behavior, it destroys the very life-
support systems on which it depends. Sooner or later, degradation of the
environment is felt in inadequacies of the food or water supply, shelter, or havens
where individuals can be safe and the young can develop. Sustainability requires
human or animal populations to stay at or below the carrying capacity of their
physical environment.

PHYSICAL AND CULTURAL CARRYING CAPACITY

Humans are a little different because of wanting more than bare subsistence.
Humans value their aesthetic, intellectual, cultural, and political creations. People
want more than a loaf of bread and processed grape juice. For humans, then,
carrying capacity refers to the number who can be supported without degrading the
physical, ecological, cultural, and social environments. Carrying capacity relates to
the desired quality of life.

The carrying capacity of the United States depends upon standard-of-living targets,
including high-quality recreational opportunities, coexistence with an abundance
and diversity of wild species, tolerable work-to-home commuting conditions,
favorable conditions for childrearing, and safe neighborhoods. Where population
size detracts from the capacity to provide these amenities, overpopulation exists.

RECOGNIZING STRESS

One may discern overpopulation quite apart from large systems and specific
resources. Overpopulation shows up in quality of life and cost of living.
Repeatedly one sees least those who wish to, will see that more people mean more
problems from pollution, crowding, and resource scarcity because even
conservationists pollute and consume. The costs of adjusting (i.e., decently
accommodating more and more people in the same amount of space and with the
same fund of natural resources) are monetized. Garbage is the topic of the hour. In
just a few years, dumping fees in U.S. cities have skyrocketed, from $5 or $10 a
ton to an average of over $150. Burning questions are whether to incinerate or not,
how to recycle, and how to make money from one's ash heap.

The rising cost of water in areas that are not naturally arid makes the same point.
Even if the quantity of water is sufficient, purity tends to suffer when population
density grows. It costs money to keep clean or clean up. A 1992 Wall Street
Journal account (Poor Pay, 1992) states that "Boston water and sewer bills have
risen 39% in the past two years as the costs of cleaning up Boston Harbor have
been phased into rates." In 1991, the average household paid $500 a year in water
and sewer bills, and "water shutoffs as a result of nonpayment of water bills…
tripled."

Demands on the public sector also increase as population grows. Taxes invariably
rise to meet the higher demand for education, social services, health care, law
enforcement, infrastructure such as schools, hospitals, prisons, systems for human
transportation, and disposal of sewage and other wastes. Concurrently, systems are
often left to deteriorate, an attractive option because taxpayers and users may not
see meaningful gains even with higher spending. Infrastructure is decaying
nationwide, but goes unnoticed until a bridge collapses, sewers leak, or tunnels
cave in.

The disappearance of natural capital is equally silent, but it is continuing at a great

rate and is compromising future production. Iowa has lost 50 percent of its topsoil
since the advent of farming in the nineteenth century. The drawdown of U.S.
aquifers is also proceeding quickly and, so far, has led to abandonment of over
300,000 formerly irrigated acres in Arizona alone. Seventy-five percent of
irrigation is threatened in Nebraska. Good air, land, water, and energy are the nuts
and jolts of carrying capacity. It is not trivial for the sustainability of our society
that, as summarized by Carrying Capacity Network (1991), the United States is
"currently losing topsoil 18 times faster than [it is being replaced; or that]
groundwater,…much of which we stored during the Ice Age and is nonrenewable,
is currently being pumped out of the ground 25 percent faster than it is being
replenished."

Substitution for very basic inputs such as soil and fresh water will be difficult.
Moreover, there may be an interactive effect: Up to now, irrigation and petroleum-
based fertilizers have compensated for deterioration in the innate productivity of
the land. But even a temporary rise in the price of petroleum, if it led to cutbacks
on fertilizer use, could unmask the hidden cost of topsoil loss. When farmers
recognize that their long-term income stream is jeopardized by present farming
practices, they are likely to shift toward a more sustainable process. Holding
farmers' capital their soil intact will have the immediate result of lowering
production to below what can be realized by current, soil depleting agricultural
methods.

Recognition of true costs and adoption of alternate (sustainable) agricultural

technologies could come suddenly, wiping out food surpluses in just a few
growing seasons. Some farmers already forgo maximizing the size of crops in
order to preserve soil. But a prudent farmer might not switch all his acreage at one
time. He knows that prices will not rise to compensate him for the decreased size
of his crop until virtually all farmers make the transition. Changes will come when
the cost of production on depleted soils rises, that is, ever-larger fertilizer and
pesticide requirements and/or higher-priced petroleum force a reduction in
production targets. This paradigmatic shift in agricultural accounting will be a
cultural as much as an economic phenomenon.

The price of food might rise if the crop got smaller, but that effect would be
limited by market mechanisms. Demand falls when prices rise, keeping downward
pressure on prices of even the most essential commodities. This constitutes price
elasticity, and it implies a question: Can people afford to buy?

Commodity prices are an unreliable indicator of scarcity, in fact, because workers

in rapidly growing populations command less and less for their labor and thus have
little to spend. Poor people do not buy much. They exert negligible effective
demand. They go without. Thus, rapid population growth causes very little pull on
most commodity prices. The price of food might not go up even if the crop were
small and the number of hungry people, large.

Most of the world's 5.5 billion people are becoming poorer as they compete against
each other for jobs. Most lose purchasing power on a yearly basis. Increasing
numbers drop out of the consumer market altogether, exerting no effective
demand. Thus; it was a fact that December, 1990, oat and wheat prices sank to
their lowest levels since 1972 while more people than before starved or lived on
the edge of famine. The multitudes do not bid up prices. Quality of life and
environmental health, not commodity prices, are clues that the carrying capacity is
being exceeded.
ENERGY AND CARRYING CAPACITY

Energy security is a key element of America's long-run, sustainable carrying

capacity. Estimates of the carrying capacity assume a particular standard of living.
The focus on energy recommends itself because, except for amenities provided by
nature and our communities, per capita energy use is a good proxy for standard of
living.

The eighty years between 1890 and 1970 were marked by the fastest rise in the
standard of living that a whole country has ever seen; indeed, the first three-
quarters of the twentieth century saw real disposable personal income rise at an
average rate of 2.2 percent per year. This same period, according to energy
specialist John Holdren (1991) of the University of California (Berkeley), saw a
record 7 kW per capita increase in use of energy (from about 4 kW to over 11 kW).
That works out to about 1.75 kW per twenty-year period, which is important for
comparison with the latest twenty years: From 1970 to 1990, per capita energy use
increased just 0.18 kW. Growth in inflation-adjusted after-tax income also stalled,
averaging about 0.5 percent per year from 1973 to 1990.

The link between energy use per capita and standard of living is clear enough in
concrete terms: Energy in the form of petroleum is the base for fertilizer,
pesticides, on-farm mechanization, and much food processing and distribution.
Energy lets us live somewhat distant from our place of work. Energy is the basis
for heating, cooling, lighting, much communication, and most laborsaving devices
in the home. Without plentiful energy, would your job exist?

To judge if we are within the carrying capacity of the United States, given the
present standard of living, ask if our rate of energy use is sustainable. The related
policy question is: Does the United States enjoy energy security? Geologists,
computer modelers, petroleum industry analysts, and life scientists largely concur
in projecting a bleak future.

A 1986 book, Beyond Oil The Threat to Food and Fuel in Coming Decades by
John Gever et al., develops the concept of "energy/profit ratio": How much usable
energy comes out for every unit of energy put in? That is, how much energy does
one get for the energy used to find, produce, refine, and distribute energy? Long
before all petroleum is used up, the best and easiest to recover deposits will be
gone. Thus, the cost in energy associated with recovering petrochemical energy
(oil and natural gas) will rise so that the profit ratio becomes less and less
favorable. This ratio will be reflected partly in higher prices and partly in lower use
of oil-based products.