Complexity of industry
In an effort to gain a better understanding of how the oil industry works, we started examining its structure last week, using some of the methods that oil industry operators and analysts use. It was revealed that the industry is usually broken into two parts, namely the upstream and downstream operations. It was also observed that some analysts add one other component and that is the midstream operations which is a minimal set of activities between upstream and downstream operations.
The content of the upstream and midstream operations were described and discussed briefly. In addition, it was pointed out that the reserves were a key element in the determination of a country’s geo-political importance and an oil company’s power and influence in the oil market. The complexity of the oil market is also seen in the way oil is priced, including the use of technical variations that give rise to two well-known price benchmarks, namely Brent Crude and West Texas Intermediate.