1The oil and gas industry significantly impacts the global economy, providing jobs in developed nations and comprising a major source of national income for oil-rich developing countries. In Russia, the oil-and-gas sector is essential, accounting for 13-15% of the world's oil and gas condensate reserves, and contributes substantially to the national trade balance and tax revenues. Crude oil, initially of little value, must be discovered, extracted, transported, and refined to produce usable fuels. The industry is divided into "upstream," which includes exploration and production, and "downstream," which involves refining and distribution. Overall, this sector plays a crucial role in economic development and energy supply worldwide.
The oil and gas industry comprises various professional disciplines, making it resemble a collection of distinct businesses. Exploration employs geophysics and geology, while production relies on advanced engineering focused on underground rock behavior, with drilling as a critical specialty. Since the mid-1980s, powerful computers have allowed for closer collaboration between geophysicists, geologists, and petroleum engineers, blending previously separate functions in the upstream sector. The downstream segment involves chemists and engineers who refine crude oil into useful products, while marketing specialists promote these products to consumers. Additionally, transportation networks connect oil fields to refineries and distribution points through various specialized businesses such as trucking and pipelines, highlighting the complexities of the petroleum supply chain.
Disparities in function and ownership in the oil and gas industry significantly affect company organization, trade patterns, and market behavior. Some companies focus on specific functions, such as independent producers specializing in upstream work or refiners concentrating on processing and marketing, while others embrace integration by owning both upstream and downstream operations. This integrated approach creates a paradox where high crude oil prices benefit producers but pose a cost to refiners, highlighting the dual nature of crude oil prices as both a revenue driver and a principal cost factor.