Theenergy industry refers to all of the industries involved in the production and sale of energy, including fuel extraction, manufacturing,refining and distribution. Modern society consumes large amounts of fuel, and the energy industry is a crucial part of the infrastructure and maintenance of society in almost all countries.
In particular, the energy industry comprises:
The increased dependence during the 20th century on carbon-emitting energy sources, such asfossil fuels, and carbon-emitting renewables, such asbiomass, means that the energy industry has frequently contributed to pollution and environmental impacts on the economy. Until recently, fossil fuels were the primary source of energy generation in most parts of the world and are a significant contributor toglobal warming and pollution. Many economies are investing inrenewable andsustainable energy to limit global warming and reduce air pollution.
The use of energy has been a key in the development of human societies by helping it to control and adapt to theenvironment. Managing the use of energy is inevitable in any functional society. In the industrialized world the development of energy resources has become essential for agriculture, transportation, waste collection, information technology, communications that have become prerequisites of a developed society. The increasing use of energy since theIndustrial Revolution has also brought with it a number of serious problems, some of which, such asglobal warming, present potentially grave risks to the world.[1]
In some industries, the wordenergy is used as a synonym forenergy resources, which refer to substances like fuels, petroleum products, and electricity in general. This is because a significant portion of the energy contained in these resources can easily be extracted to serve a useful purpose. After a useful process has taken place, the total energy is conserved. Still, the resource itself is not conserved since a process usually transforms the energy into unusable forms (such as unnecessary or excess heat).
Ever since humanity discovered various energy resources available in nature, it has been inventing devices, known as machines, that make life more comfortable by using energy resources. Thus, although primitive man knew the utility of fire to cook food, the invention of devices likegas burners and microwave ovens led to additional ways of how energy can be used. The trend is the same in any other field of social activity, be it the construction of social infrastructure, manufacturing of fabrics for covering, porting, printing, decorating, for example, textiles, air conditioning, communication of information, or for moving people and goods (automobiles).
Production andconsumption of energy resources is very important to the global economy. All economic activity requires energy resources, whether to manufacture goods, provide transportation, run computers and other machines.
Widespread demand for energy may encourage competing energyutilities and the formation of retailenergy markets. Note the presence of the "Energy Marketing and Customer Service" (EMACS) sub-sector.[2]
The energy sector accounts for 4.6% of outstanding leveraged loans, compared with 3.1% a decade ago, while energy bonds make up 15.7% of the $1.3 trillion junk bond market, up from 4.3% over the same period.[3]
Since the cost of energy has become a significant factor in the performance of societies' economies, the management of energy resources has become crucial. Energy management involves using the available energy resources more effectively, that is, with minimum incremental costs. Simple management techniques can often save energy expenditures without incorporating fresh technology.[4] Energy management is most often the practice of using energy more efficiently by eliminating energy wastage or balancing justifiable energy demand with appropriate energy supply. The process couples energy awareness withenergy conservation.
The United Nations developed theInternational Standard Industrial Classification, which is a list of economic and social classifications.[5] There is no distinct classification for an energy industry, because the classification system is based onactivities,products, andexpenditures according to purpose.[6]
Countries in North America use theNorth American Industry Classification System (NAICS). The NAICS sectors No. 21 and No. 22 (mining and utilities) might roughly define the energy industry in North America. This classification is used by theU.S. Securities and Exchange Commission.
TheGlobal Industry Classification Standard used byMorgan Stanley define the energy industry as comprising companies primarily working with oil, gas, coal and consumable fuels, excluding companies working with certain industrial gases.[7]Add also to expand this section:Dow Jones Industrial Average[8]
Government encouragement in the form of subsidies and tax incentives forenergy-conservation efforts has increasingly fostered the view of conservation as a major function of the energy industry: saving an amount of energy provides economic benefits almost identical to generating that same amount of energy. This is compounded by the fact that the economics of delivering energy tend to be priced for capacity as opposed to average usage. One of the purposes of asmart grid infrastructure is to smooth out demand so that capacity and demand curves align more closely.Some parts of the energy industry generate considerable pollution, including toxic andgreenhouse gases from fuel combustion,nuclear waste from the generation of nuclear power, andoil spillages as a result of petroleum extraction. Government regulations to internalize theseexternalities form an increasing part of doing business, and the trading ofcarbon credits andpollution credits on the free market may also result in energy-saving and pollution-control measures becoming even more important to energy providers.
Consumption of energy resources, (e.g. turning on a light) requires resources and has an effect on the environment. Many electric power plants burn coal, oil or natural gas to generate electricity for energy needs. While burning these fossil fuels produces a readily available and instantaneous supply of electricity, it also generates air pollutants including carbon dioxide (CO2),sulfur dioxide and trioxide (SOx) and nitrogen oxides (NOx). Carbon dioxide is an important greenhouse gas, known to be responsible, along withmethane,nitrous oxide, andfluorinated gases, for the rapid increase inglobal warming since the Industrial Revolution. In the 20th century, global temperature records are significantly higher than temperature records from thousands of years ago, taken fromice cores in Arctic regions. Burning fossil fuels for electricity generation also releases trace metals such as beryllium, cadmium, chromium, copper, manganese, mercury, nickel, and silver into the environment, which also act as pollutants.
The large-scale use ofrenewable energy technologies would "greatly mitigate or eliminate a wide range of environmental and human health impacts of energy use".[9][10] Renewable energy technologies includebiofuels,solar heating and cooling,hydroelectric power,solar power, andwind power.Energy conservation and theefficient use of energy would also help.
In addition it is argued that there is also the potential to develop a moreefficient energy sector. This can be done by:[11]
Best available technology (BAT) offers supply-side efficiency levels far higher than global averages. The relative benefits of gas compared to coal are influenced by the development of increasinglyefficient energy production methods. According to an impact assessment carried out for theEuropean Commission, the levels ofenergy efficiency of coal-fired plants built have now increased to 46–49% efficiency rates, as compared to coals plants built before the 1990s (32–40%).[12] However, at the same time gas can reach 58–59% efficiency levels with the best available technology.[12] Meanwhile,combined heat and power can offer efficiency rates of 80–90%.[12]
Since energy now plays an essential role inindustrial societies, the ownership and control of energy resources plays an increasing role in politics. At the national level, governments seek to influence the sharing (distribution) of energy resources among various sections of the society through pricing mechanisms; or even who owns resources within their borders. They may also seek to influence the use of energy by individuals and business in an attempt to tackleenvironmental issues.
The most recent international political controversy regarding energy resources is in the context of theIraq Wars. Some political analysts maintain that the hidden reason for both 1991 and 2003 wars can be traced to strategic control of international energy resources.[13] Others counter this analysis with the numbers related to its economics. According to the latter group of analysts, U.S. has spent about $336 billion in Iraq[14] as compared with a background current value of $25 billion per year budget for the entire U.S. oil import dependence[15]
Energy policy is the manner in which a given entity (often governmental) has decided to address issues of energy development, including energy production, distribution and consumption. The attributes of energy policy may include legislation, international treaties, incentives to investment, guidelines forenergy conservation, taxation and other public policy techniques.
Energy security is the intersection of national security and the availability of natural resources for energy consumption. Access to cheap energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries has led to significant vulnerabilities. Threats to energy security include the political instability of several energy producing countries, the manipulation of energy supplies, the competition over energy sources, attacks on supply infrastructure, as well as accidents, natural disasters, the funding to foreign dictators, rising terrorism, and dominant countries reliance to the foreign oil supply.[16] The limited supplies, uneven distribution, and rising costs offossil fuels, such as oil and gas, create a need to change to moresustainable energy sources in the foreseeable future. With as much dependence that the U.S. currently has for oil and with the peaking limits of oil production; economies and societies will begin to feel the decline in the resource that we have become dependent upon. Energy security has become one of the leading issues in the world today as oil and other resources have become as vital to the world's people. But with oil production rates decreasing and oil production peak nearing, the world has come to protect what resources we have left. With new advancements in renewable resources, less pressure has been put on companies that produce the world's oil; these resources are geothermal, solar power, wind power, and hydroelectric. Although these are not all the current and possible options for the world to turn to as the oil depletes, the most critical issue is protecting these vital resources from future threats. These new resources will become more valuable as the price of exporting and importing oil will increase due to increased demand.
Producing energy to sustain human needs is an essential social activity, and a great deal of effort goes into the activity. While most of such effort is limited towards increasing the production of electricity andoil, newer ways of producing usable energy resources from the available energy resources are being explored. One such effort is to explore means of producinghydrogen fuel from water. Though hydrogen use is environmentally friendly, its production requires energy and existing technologies to make it, are not very efficient. Research is underway to exploreenzymatic decomposition of biomass.[17]
Other forms of conventional energy resources are also being used in new ways.Coal gasification and liquefaction are recent technologies that are becoming attractive after the realization thatoil reserves, at present consumption rates, may be rather short lived. Seealternative fuels.
Energy is the subject of significant research activities globally. For example, theUK Energy Research Centre is the focal point for UK energy research while the European Union has many technology programmes as well as a platform for engaging social science and humanities within energy research.[18]
All societies require materials and food to be transported overdistances, generally against someforce of friction. Since application of force over distance requires the presence of a source of usable energy, such sources are of great worth in society.
While energy resources are an essential ingredient for all modes of transportation in society, the transportation of energy resources is becoming equally important. Energy resources are frequently located far from the place where they are consumed. Therefore, their transportation is always in question. Some energy resources like liquid or gaseous fuels are transported using tankers orpipelines, while electricity transportation invariably requires a network ofgrid cables. The transportation of energy, whether by tanker, pipeline, or transmission line, poses challenges for scientists and engineers, policy makers, and economists to make it more risk-free and efficient.
Economic and political instability can lead to anenergy crisis. Notable oil crises are the1973 oil crisis and the1979 oil crisis. The advent ofpeak oil, the point in time when the maximum rate of global petroleum extraction is reached, will likely precipitate another energy crisis.
Between 1985 and 2018 there had been around 69,932 deals in the energy sector. This cumulates to an overall value of US$9,578bn. The most active year was 2010 with about 3.761 deals. In terms of value 2007 was the strongest year (US$684bn), which was followed by a steep decline until 2009 (−55.8%).[19]
Here is a list of the top 10 deals in history in the energy sector:
| Date Announced | Acquiror Name | Acquiror Mid Industry | Acquiror Nation | Target Name | Target Mid Industry | Target Nation | Value of Transaction ($mil) |
|---|---|---|---|---|---|---|---|
| 12/01/1998 | Exxon Corp | Oil & Gas | United States | Mobil Corp | Oil & Gas | United States | 78,945.79 |
| 10/28/2004 | Royal Dutch Petroleum Co | Oil & Gas | Netherlands | Shell Transport & Trading Co | Oil & Gas | United Kingdom | 74,558.58 |
| 04/08/2015 | Royal Dutch Shell PLC | Petrochemicals | Netherlands | BG Group PLC | Oil & Gas | United Kingdom | 69,445.02 |
| 02/25/2006 | Gaz de France SA | Oil & Gas | France | Suez SA | Power | France | 60,856.45 |
| 07/05/1999 | Total Fina SA | Oil & Gas | France | Elf Aquitaine | Oil & Gas | France | 50,070.05 |
| 08/11/1998 | British Petroleum Co PLC | Oil & Gas | United Kingdom | Amoco Corp | Oil & Gas | United States | 48,174.09 |
| 09/01/2010 | Petrobras | Oil & Gas | Brazil | Brazil-Oil & Gas Blocks | Oil & Gas | Brazil | 42,877.03 |
| 10/16/2000 | Chevron Corp | Petrochemicals | United States | Texaco Inc | Petrochemicals | United States | 42,872.30 |
| 06/20/2000 | Vivendi SA | Water and Waste Management | France | Seagram Co Ltd | Motion Pictures / Audio Visual | Canada | 40,428.19 |
| 12/14/2009 | Exxon Mobil Corp | Petrochemicals | United States | XTO Energy Inc | Oil & Gas | United States | 40,298.14 |
The Energy Marketing and Customer Service (EMACS) conference/exhibition focuses exclusively on the selling of energy in competitive retail markets.
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