Encouraging downstream processing: industrial policy or resource nationalism?

Why is it crucial to consider downstream processing at this time? There has long been a discussion in economic policy circles about downstream processing, most notably in the context of central planning or mercantilism, as evidenced by the former Soviet Union. With the fall of the Soviet Union, the demise of central planning, and the dismal outcomes of industrial policy as it was implemented in both developed and developing nations during the 1970s and 1980s, it would have been simple to assume that this conversation had come to an end. It seemed reasonable to assume that recent history would have provided enough empirical proof to reassure even the most doubtful. Over the last three decades, global trade has expanded at an unprecedented rate, leading to a significant decline in poverty. This can be attributed, at least in part, to specialization and the dispersion of supply chains. Notably, global trade has outpaced global GDP growth, refuting the claims made by proponents of policies

Downstream: What Operations Are, What Kinds There Are, and Some Examples

What do downstream operations mean?

The steps that turn oil and gas into the finished product are called downstream operations. Some of these are turning crude oil into gasoline, diesel, natural gas liquids, and other types of energy. It is said that an oil and gas business is further downstream if it is not as close to the process of making petroleum products for people.

Learning About Downstream Activities

"Integrated" refers to the fact that most big oil companies, like ExxonMobil, do both upstream and downstream activities. Upstream activities include things like research and production. There are three types of oil and gas operations: upstream, middle, and downstream. The process of refining and distributing the oil are both examples of downstream activities. The moving and storing of oil and gas are examples of midstream activities. The companies in the downstream sector are the ones that regularly make things for people. Once crude oil is found and removed (the upstream process), it is shipped and moved (the midstream process). The oil is then refined, marketed, spread, and sold. This is called the downstream process.

Different kinds of downstream work

The downstream process makes the most products that people can use, and this is the part of the oil and gas business that most people can relate to. Liquefied natural gas, gasoline, heating oil, plastics, antifreeze, fertilizers, chemicals, synthetic rubber, and more are some of these goods.There are other parts of the business that the downstream industry is very important to that some people might not see, like the medical field. Some of the things that medical workers need and use are affected by the downstream process in a big way. In the same way, the downstream process is very important in agriculture because it affects pesticides, fertilizers, and the fuel that field equipment needs.

Between Upstream and Downstream

There is a big difference between downstream and upstream operations when it comes to the step of getting crude oil to the customer. Upstream operations include looking for oil in new areas, finding the oil, digging for it, and getting it out of the ground. The initial discovery part is also part of this. "Exploration and production" (E&P) is another name for this part of the oil industry. On the other hand, this piece looks at downstream operations, which are the steps that happen after production and up to the point of sale.

One example of a downstream operation

There is too much crude oil on the market, and prices have gone down. This may hurt integrated and upstream oil companies, but it helps downstream businesses a lot. While crude oil prices drop quickly, the prices of petroleum products usually fall after them. This is because there is a lot of demand for processed petroleum products. When the price of crude oil goes down, refining earnings usually go up. However, as the price of oil goes up, refining profits may go down. As an example, let's say that ABC Inc. is an oil refinery that mostly turns West Texas Intermediate (WTI) crude oil into gasoline. Because oil prices change with the seasons, there are times when downstream companies may only make small profits or even lose money. The Organization of Petroleum Exporting Countries (OPEC) has said it will cut production, even if it's in the winter when people don't need as much gasoline. Prices for gasoline are $2.50 a gallon, or $105 a barrel, while prices for WTI crude are $95 a barrel. That means ABC Inc. only has a $10 per barrel profit ($105 – $95). Let's say that the next year, gas prices stay at $2.50 a gallon but WTI crude oil prices drop a lot because of a world supply glut. WTI crude oil prices drop to $50 per barrel because there is too much on the market. Because of this, ABC Inc. has a $55 per barrel refining profit ($105 – $50). That being said, this profit doesn't look at any other costs the business might have; the crack spread only looks at the costs of crude oil.

Downstream Frequently Asked Questions

What does "downstream" mean in software development?

Downstream development in software means making tools for apps that already exist or are being used. Upstream, on the other hand, refers to source code that is further "up" the development process, like changes and bug fixes.

What Does "Downstream" Mean in Telecommunications?

Upstream data in a phone network is anything that comes from the network, the cloud, or the service source and goes "down" to the user. As an example, downloading a movie is downstream because the video has been sent from the host to the computer.

What does downstream marketing mean?

Downstream marketing focuses on making quick sales and more money by using advertising dollars, social media, and direct sales. For now, upstream marketing is more long-term and strategic, and it focuses on bringing out new products.

What does "downstream processing" mean in biology?

Once biological materials are taken from natural sources, like plant or animal flesh, they are cleaned up in a process called downstream processing in biotechnology.

In Short

In the oil and gas business, the steps that are closest to the end user—the person who fills up their car, runs their engine, and uses oil in their daily life—are called the downstream process. Even though most oil and gas companies work together, it's important to remember that downstream processes show how the oil is refined, promoted, distributed, and sold.


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