This conference has highlighted the highly complex nature of the global energy business and the everchanging dynamics of all facets of the industry. Previous speakers, in their excellent presentations, have stressed this complexity and have described the present period of dramatic change in the energy business. We have been very fortunate to have learned this from such an eminent group of experts. I would like to follow up this analysis and insight with a general overview of the industry from a historical perspective, principally reviewing the supply and demand determinants in the late 1970's and 1980's.

This overview will include the identification of strategic and geopolitical factors that affected the supply/ demand equation over the last fifteen years.

Following this overview, an analysis incorporating these factors for the 1990's will be presented. This analysis will include a description of the capital and funding implications as a result of the changes witnessed in the recent past and those we anticipate in the near future.

OVERVIEW The modern oil industry has seen enormous change in its 134-year history from the time that Colonel Edwin Drake drilled the first rotary-bored oil well in Titusville, Pennsylvania, U.S.A. Throughout its history, the industry has shown excellent growth, profitability, and more importantly, resilience. The oil business still produces significant revenue, income, cash flow, and employment on a global basis. Revenues are $1 trillion a year, twice the GDP of Canada and on the scale of British or Italian GDP. Annual income, based on average after-tax profitability of $3 a barrel, is estimated at $75 billion, not including earnings from natural gas and oil derivatives such as petrochemicals. Cash flow is similarly estimated at $200 billion a year, and worldwide employment at 5 million. The private-sector oil industry will continue to thrive, especially as governments open up their markets in developing countries, and financial and natural resources must be allocated more wisely than ever before. The result will be a more significant role for private-sector oil companies in the next decade. To provide an important perspective in this regard, an analytical look at oil industry history can provide a framework for determining the major factors that drive the oil industry and the financing implications that result from changes in these factors.

Distribution of oil reserves In 1970, according to the BP Statistical Review of World Energy, the world had 600 billion barrels of oil. Figure 1 portrays the distribution of oil among the various regions of the world. The Middle East, with about half the world's known reserves, was understood to be the predominant player in oil distribution. North America was shown to have 50 billion barrels, or about 8% of the total

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