Crude oil contributes widely to the global economy, although increasing pressure to move towards more sustainable sources of energy is presenting a challenge to the oil and gas industry.
There is a deep understanding that the world needs to reduce its reliance on fossil fuels, but given the level of infiltration that these products have into a wide range of industry sectors, there is likely to be strong demand for this product, always.
7 ways the petroleum sector contributes to the global economy
1. Energy
We can’t imagine a day without the use of petroleum, can we? Crude oil can be refined into petrol, diesel, heating oil, and jet fuel and is used to power many forms of transportation, industry, and our homes. Without affordable sources of crude oil, it would not be possible to go on vacation, commute long distances, operate manufacturing plants, use modern methods of agricultural production, and so many other things.
2. Petrochemical industry
The petrochemical industry produces a range of chemicals and materials that are used in the manufacture of fertilizers, plastics, pharmaceuticals, paints, and many other products that make it into our homes and businesses on a daily basis. This industry is a significant contributor to the global economy and without it, other sectors, such as agriculture, construction, and retail would struggle to exist.
3. Transport
As we touched on, the transport sector relies heavily on petroleum-derived fuels. The majority of automobiles, vans, planes, trains, and ships use internal combustion engines of one form or another to operate and without a ready source of oil to operate, it is likely that the knock-on effect on other industries such as trade and tourism would be severe.
4. Government Revenue
Heavy taxes and levies imposed upon the oil and gas sector generate considerable revenue for governments around the world which are then used to fund public infrastructure, education, healthcare, and many other essential services that citizens of those countries rely on daily. In Canada, the oil and gas sector contribute up to 6.2% of the country’s total GDP [1].
5. Global Trade
Oil and gas are some of the most highly traded commodities in the world. As the Russian invasion of Ukraine demonstrated, interruption of this trade can have significant implications for countries that rely on the supply of such products to maintain their own financial standing. It is clear that the supply of these products around the globe is a significant contributor to world economic growth.
6. Economic Investment
Countries that are rich in crude oil resources attract substantial investment from businesses with an interest in exploring, drilling, and refining those resources. The funds generated from such activity can be used to develop infrastructure, create jobs, develop new technologies, and of course, increase the pace of economic growth within those regions.
7. Create jobs
Many jobs are created every year by the oil and gas industry. It develops new extraction and refinery processes, organizes and secures a safe logistics route for the extracted products, sells and distributes the products, develops new techniques and technologies, and much more. Related industries such as manufacturing and engineering also create many new jobs every year to accommodate and capitalize on advances made within the sector.
Resources:
[1] https://www.canadianenergycentre.ca/the-oil-and-gas-sectors-contribution-to-canadas-economy-2/