Exxon and the Environment

ExxonMobil

Domestic Environment

The oil industry in the U.S. serves as the foundation for virtually the whole economy. The U.S. has largely exhausted its own domestic oil supply so it must rely primarily on foreign sources. New technologies have allowed the extraction of the oil that still remains in the U.S. Offshore drilling and oil reserves that are only accessible by hydraulic fracking represent the two best examples of controversial extraction methods. The oil spill in the Gulf of Mexico represents very clearly the risks associated with off-shore extraction. Furthermore, hydraulic fracking and the use of shale reserves have also been meet with a lot of resistance for their environmental risks.

Global Environment

The global environment for oil and gas has changed significantly in just the last few years. The conditions have been created by an increase supply in oil. These supply increases have largely come from technological developments that have allowed for new forms of oil to extract such as shale oil which has in turn reduced the dependence on the cartels and Middle Eastern oil (Doshi & Corrigan, 2015). There have also been changes in the demand due to technology development as well. Engines and efficiencies have reduced the total demand for oil per user despite the fact that the number of total oil and gas users have increased rapidly in the developing world.

Economic Environment

Currently the economic environment for oil producers and related industries is somewhat bleak in the short-term. The fall in oil prices has led companies to experience falling margins and losses. Exxon has not been immune from this trend, even with its massive size. Companies will have to make some tough economic decision in the short-term.

"Exxon Mobil and Chevron on Friday posted their worst quarterly results of the current decade as oil and natural gas prices continued to plunge.

The results of the companies, and those of almost the entire oil patch this week, were disappointing but not all that surprising since the price of oil is now half what it was a year ago." (Krauss, 2015)

Figure 1 - Prices/Production (The Economist, 2015)

Political-Legal Environment

There are two primary political risks to Exxon and other companies in the oil industry. One obvious risk is due to different regulations that could be enacted that deal with environmental or other issues. However, much of the oil and gas industry is heavily subsidized and there is also some risk that these subsidies could begin shrinking with new priorities. Legal risks can also come from a range of different sources. Oil extraction can poise many risks and there are often environmental and human costs to these accidents. Oil companies all over the world are frequently involved in lengthy litigations and this is generally considered to be a part of the business.

Socio Cultural Environment

One of the primary challenges that oil companies must deal with in terms of their socio cultural operating environment is the fact that most oil companies, like Exxon, are multinational. Thus the company has to work with individuals from all over the globe that represent far different cultures to operate. Coupled with the fact that their projects are often technologically challenging, the diversity in the industry can pose many problems for oil companies. There are also some evidence of social trends that are pressuring companies and governments to begin to shift to alternative energy sources.

Technological Environment

The technological advancement within the oil and gas industry has become increasingly sophisticated over the years. There have been increasing capabilities to tap all available resources in existing oil wells as well as the increased capacity to extract oil in locations never before thought possible. The artic, which has an incredibly hostile environment, is one such place in which technology has made extraction possible. There have also been many advances in refinement that have made shale oil projects more feasible in many areas. However, it is possible that with the lower oil prices, technological advancement in the short-term may be somewhat stifled because of the large supplies already available using available technologies.