Current Global Energy consumption scenario

Using the PESTER analytical tool, critically analyse the impact of the Renewable energy policies of any developed economy on any OPEC member state’s energy policy.

The fossil fuel reserves are continually depleting due to excessive exploitation all over the world. This is due the greater dependence of masses on conventional energy sources for meeting their daily needs. This is resulting in a high emission of greenhouse gases, which are mainly responsible for the global warming. Presently, about 74% of the global energy requirements are met by fossil fuel (Bauger et al. 2015). However, many alternate sources of energy have been discovered, but they are not sufficient meeting the growing energy requirement. The focus of the developing countries has shifted towards exploring the alternate clean and renewable energy sources. They are also framing strict rules and regulations for reducing the emission of the greenhouse gases. Developed countries are looking for energy security with a focus on climate change mitigation (Zhang et al. 2012). The UK is also discovering the renewable and unconventional sources of energy for achieving energy sustainability. It is capitalizing on solar energy and wind energy to meet the energy requirement marginally. All these developments in the UK and other developed countries have serious implications for the OPEC, which need to revisit its energy strategy for future.

Currently, the most of the countries are heavily dependent on the fossil fuel for meeting their energy requirement. According to Lior (2013), this has resulted in the global warming caused due to the emission of greenhouse gasses. Therefore, the focus of developed nations is the exploitation of existing and emerging sources of renewable energy. Since the reserve of fossil fuel is limited, it is the biggest responsibility of our generation to invent and explore the new forms of energy. The challenge is to ensure energy sustainability while mitigating the effects of global warming at the same time.

OPEC has complete control over the trade of crude oil and its byproducts (Zhang et al. 2012). It decides the prices o oil and petroleum products in the international market. WTO, which is the regulatory body for controlling all the cross-border trade between two nations, has no jurisdiction over the trade of crude oil in international market. The situation is changing with the country like the US and the China developing their capacity for producing crude oil for meeting their energy requirements partially (Asif and Muneer 2014). Because of this, OPEC is also under pressure to lower the prices of crude oil products.

Prospect of renewable energy sources for the UK

(Source: www.energytribune.com)

The UK is also heavily dependent on the fossil fuel for meeting its energy requirement. It is bringing incremental changes in moving towards energy efficiency by exploring the unconventional and renewable sources of energy. According to Allen (2013), the UK government has prepared a roadmap for meeting 15% of its energy requirement by renewable energy sources.

To achieve this challenging and ambitious target the UK government is investing heavily in renewable and nonconventional forms of energy such as wind energy, solar energy, tidal energy, marine energy, biomass energy and hydro energy (Mitchell and Connor 2014). UK produces 20% of its total electricity from the nonrenewable sources. It has set a target of stretching it to 30% by the end of 2020 (Foxon et al. 2015). The UK government is trying to achieve the energy efficiency with sight on reducing the carbon emission. The government aims is to make a clean and green UK for the future generation. The geographic position of the UK is very fruitful for the generation of wind energy at both offshore and onshore (Twidell and Weir 2015). The government has made a huge investment in the offshore and onshore wind energy projects. The total installed capacity of windmills of the UK is almost equal to combined capacity of the rest of the world.

Figure: Share of renewable sources of energy in UK

(Source: www.carbonbrief.com)

The environment in which an industry or organization operates is directly or indirectly affected by the external and internal factors. The microenvironment directly affects any particular organization whereas; macro environment affects all the organizations operating in any particular industry. PESTLE stands for Political, Economical, Social, Technological, Legal and Environmental respectively.

Political Factors

Crude oil is the most sought after commodity, which drives the economies of the world. Any fluctuation in crude oil prices has severe economic implications for all the countries due to their dependence on the fossil fuel for meeting their energy requirements. Currently, crude oil prices registered a monumental 70% increase from the prices last year (Asif and Muneer 2014). Like any other commodity, crude oil prices are also determined by the principle of demand and supply. Rising prices of crude oil of have a lasting impact on the economy of the developing countries. The demand for crude oil products is expected to be rising shortly while the production from existing sources is reduced by 4% because of social and political turbulences going in the Middle East region (Mitchell and Connor 2014).

PESTEL Analysis of energy sector

Economic Factors

The oil and petroleum industry drive the global economy. The oil reserve of OPEC countries is the backbone of their economies. Any minor change in the rate of production of oil has a major effect on the economy of the rest of the countries of the world. This is due to a high dependence of energy requirements of domestic and commercial users. The oil and petroleum industry has production industry in the upstream and refinery industry in the downstream.

The crude oil prices are affected by demand situation, the rate of production and discovery of the new oil reserves. Apart from this, demand for the large number of byproducts of crude oil such as plastic, insecticides, rubber, paint also affect the crude oil prices to a great extent.

Social Factors

The social factors too have a major impact on the production of oil in the OPEC countries. Currently, middle-east countries are undergoing through a lot of social and political turbulence mainly caused by terrorist activities in the neighboring countries. The oil and petroleum industry have brought significant changes in the lives of people of these countries. The social scientists think that the excessive exploitation of oil reserves is resulting in the accumulation of wealth in the hands of few people while there no major changes in the lives of the ordinary people (Twidell and Weir 2015). The oil companies are involved in the exploitation of basic human right of the workers from the Asian countries. This is also affecting the environment and eco-system in the middle-east countries. The environment activists are demanding to frame strict rules in this regard.

Technological Factors

The OPEC countries are continuously upgrading the techniques of oil exploration, production, processing, and distribution. All these technological developments are resulting in the higher production of crude oil. This increase is not sufficient to match the ever-growing demand for oil and petroleum products of the global population. The latest technologies are also focusing on the environmental protection and sustainable development of the population residing around oil fields (Farret and Simoes 2013).

The latest techniques of logistics are resulting in the minimum loss during transportation and distribution. The satellite imaging is used in the exploration of the new oil reserves, which is leading to the discovery of many virgin oil fields (Grubb 2012).

Environmental Factors 

The excessive exploitation of the existing and emerging oil fields is bringing environmental degradation in the OPEC countries. It has mostly affected the marine species, and many of them are reported to become extinct. This is having an adverse effect on the eco-system and ecology of these countries. The temperature is also growing rapidly in these countries, which are bringing change in the climate (Bauer 2015). There is a frequent outburst of natural disasters such as storms, tsunami, tornados, earthquakes, etc. There is a lack of robust rules and regulation for the protection of the environment, which is giving free rum to the companies for continuing their environmental derogatory work practices.

Legal Factors

The OPEC is the sole regulatory authority in the world, which has complete control over the exploration, production, supply and distribution of oil and petroleum products in the member countries. It has the monopoly over the trade of oil products in the global market and decides the prices of oil and petroleum products at its convenience. The WTO, which is a UN body formed for regulating the global trade also has no jurisdiction over the trade of crude oil products (Fischer, Gately and Kyle 2015). The UN is trying to impose some legal obligation on OPEC for addressing the issue of basic rights of workers, environmental protection, and consumer protection (Grubb 2012).   

According to Ghadar (2105), OPEC is revisiting its existing strategy for oil exploration and production for alignment with the developments going on in the developing countries, which may affect the dynamics of oil trade in the future. They may not be in the driver seat of the oil and petroleum industry in the countries like China, UK, US and India developing their capacity for oil exploration and production (Twidell and Weir 2015). They are also keeping a close tab on the discovery of new renewable sources of energy in the developed countries. They know that the quest of the developed nation like UK to become energy efficient by using their natural resources could have lasting and serious financial implications for the OPEC countries. Therefore, a comprehensive change in the policy of OPEC is required to meet the upcoming challenges (Fischer et al. 2015). The future strategy of OPEC is to bring stability in the prices of oil and petroleum products as too high or too low prices are not in the favor of producer as well as consumers (www.opec.org).   

The role of OPEC becomes very crucial in the wake of the ongoing energy crisis, climate change and global warming. OPEC has enjoyed the monopoly in the trade of oil and petroleum products for a long time. It is high time that the OPEC should make significant changes in the work procedures to address the issues of climate change, environmental protection, sustainable development, energy security and prosperity of the people. The latest scientific discovery in the developed country is focused towards finding new renewable sources of energy, which do not cause environmental degradation. The next century may be the century of clean, renewable, and unconventional energy. The OPEC cannot keep the issue of global warming, pollution, carbon emission, and sustainable development at bay any longer.

Conclusion

The world is heading towards a major energy crisis due to high dependence on the fossil fuel for meeting its energy requirements. As the reserves of coal and crude oil are limited, they may become depleted in the next century. According to energy experts, it is high time to look for the new unconventional and renewable sources of energy to avoid a likely energy scarcity in the coming future. The excessive use of fossil fuel for fulfilling energy requirements is causing severe damage to the environment. The ongoing crisis of global warming is the result of carbon emission caused due to the burning of fossil fuel. The most countries are setting an ambitious target of reducing the carbon emission to bring the situation under control. There is a growing emphasis on increasing the capacity of existing alternative energy projects and setting new plants to produce the electricity using solar energy, wind energy, tidal energy, biomass, and hydroelectricity. The UK has made a significant improvement in the production of offshore and onshore wind energy with having capacity almost equal to rest of the world combined. These developments are forcing the OPEC to make necessary changes in their strategy to come to terms with these. They have overlooked the impact of high oil exploration and production but are recognizing the fact that balance is needed to maintain for addressing the issue of climate change. This may isolate the OPEC in the international community if it continues to overlook theses issues, which may have a long-term impact on the economy of the OPEC countries. They also need to explore the unconventional techniques for oil exploration and production for minimizing the damage to the eco-system of the region.

Reference List

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