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The Top Challenges Facing the Oil and Gas Industry

The Top Challenges Facing the Oil and Gas Industry

While every year comes with new challenges for the oil and gas industry, 2020 presents hurdles operators have never seen before. Plummeting demand and prices due to COVID-19 create short-term threats that have companies reevaluating their plans and processes. Meanwhile, the long-term effects of a global shift toward renewable energy continue to loom on the horizon. Balancing both of these issues puts pressure on an industry that is already facing a lot of uncertainty. How can businesses address the top challenges facing the oil and gas industry in 2020? Learn more with this rundown.

Like many industries, COVID-19 and the new societal norms it has produced have taken their toll on oil and gas. At the start of the pandemic, the demand for motor gasoline and jet fuel dropped dramatically. While motor gasoline is slowly recovering as the nation reopens, jet fuel demand remains unprecedentedly low. It’s difficult to say how the market will shift as the economy works toward recovery or what will happen if we experience a second wave of virus cases. When facing such uncertainty, operators must learn to be agile so that they can meet ever-changing needs and conditions. Permanent process changes to become more cost-effective—such as incorporating remote work capabilities—can also prove useful when facing such drastically low market prices.

The Uncertain COVID-19 Market

Like many industries, COVID-19 and the new societal norms it has produced have taken their toll on oil and gas. At the start of the pandemic, the demand for motor gasoline and jet fuel dropped dramatically. While motor gasoline is slowly recovering as the nation reopens, jet fuel demand remains unprecedentedly low. It’s difficult to say how the market will shift as the economy works toward recovery or what will happen if we experience a second wave of virus cases. When facing such uncertainty, operators must learn to be agile so that they can meet ever-changing needs and conditions. Permanent process changes to become more cost-effective—such as incorporating remote work capabilities—can also prove useful when facing such drastically low market prices.

A Shift in the Natural Gas Market

While demand for natural gas didn’t fall as much as the demand for refined oil products, recovery is still uncertain. In addition to questions revolving around COVID-19, natural gas production and distribution must deal with the changes brought by a global shift toward renewable energy. To stay relevant in a lower-carbon world, operators should consider diversifying their portfolio to several economies, such as those in Asia or Latin America. Additionally, liquified natural gas exporters should prepare to buckle down in the face of a tight market. Though canceling upcoming projects might cut costs in the short-term, perseverance could be the key to securing natural gas supply and avoiding further industry crises in the years to come.

Short-Term Challenges vs Long-Term Industry Changes

COVID-19 has caused a lot of trouble for the oil and gas industry, but it isn’t the only threat ahead. As businesses address the above challenges, they should also consider long-term problems facing the industry. Growing environmental concern has been one of the top challenges facing the oil and gas industry over the past few years, and it will continue to create hurdles in the years to come. Operators should be wary of allowing the short-term uncertainty of the pandemic to undermine the long-term challenges and opportunities of an energy transition. Continue to pay attention to ways your business can get ahead during the move toward renewable energy. Expanding into renewable power, researching biofuels, and improving energy efficiency can help position your business for a stronger economic recovery both after the pandemic and in the shift away from carbon-heavy resources.

As your company faces the challenges of the industry, make sure you have the right tools and products on your side. Petersen Products provides high-quality plugs, testing equipment, and other industrial pipeline products to help you and your employees succeed in an ever-changing world.

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