What problems can blockchain solve in the oil industry?
The oil and gas industry involves so many layers: drilling equipment providers, seismic data providers, pipeline design companies, oil and gas service companies, surveyors (to find new sources), refineries (to turn crude oil into fuel products), transport ships and tankers to carry these products all over the world. Do you want to gain more knowledge about oil trading before entering this market? Here are some interesting details about dealing with crude oil.
Blockchain technology can bring transparency to this enormously complicated process through one shared digital ledger that would be available anytime and anywhere on any device. For example, in the oil industry, the digital ledger would be the oil price, the primary input data for upstream, downstream, and midstream operations. The system can also help oil companies to accelerate time-to-market, improve collaboration and reduce costs.
The 5 Main Oil Industry Issues Blockchain Can Solve:
The oil field has been a failure in many industries for a long time as it’s a complex business process with many suppliers, stakeholders, and partners. Wherever there’s money involved, there are people who are watching closely for an opportunity to manipulate prices. Blockchain technology can counter this by tracking every contract related to all aspects of the industry, down to each specific entity that would be involved in any given deal. As a result, it would eliminate many supply chain relationships, reduce the scope for fraud or mismanagement, and significantly improve trade terms in the energy industry.
In addition, information needs to be shared fast among all parties to make sure decisions are made efficiently. It can be a problem during resource allocation because different stakeholders have independent views on supply and demand, which makes it hard to get a clear answer on the future direction of oil and gas.
It is where blockchain can shine. It helps identify the best opportunities by using internationally recognized data points across all stakeholders, companies, regions, and agents involved in a given transaction.
Blockchain can reduce corruption in the oil industry:
The oil industry is one of the most corrupt businesses in the world. An example of corruption is when dollars are traded for barrels, manipulating oil prices. Blockchain can help by eliminating intermediaries and using smart contracts, limiting corruption. Transparency would also lead to reduced business costs. In addition, blockchain can improve the speed in the oil industry:
Blockchain is based on a decentralized system, meaning all transactions are recorded in different places and at different times. When transactions are recorded, it is hard to change or delete them. Therefore it will lead to fewer mistakes, more speed, and cost savings.
Blockchain can help with new business opportunities:
Oil prices are constantly fluctuating, which produces uncertainty among all stakeholders in the industry and causes a lot of losses. For example, using cloud computing and smart contracts would allow access to real-time data and analysis to show the chain reaction of price movements. As a result, blockchain can predict future oil industry trends, leading to better business decisions.
Blockchain can explain why it’s cheaper for companies to go with other responses:
Risks are one of the main issues on a company’s financial statement. Blockchain can help by showing all transactions in one place. It could also provide a solid overview of a company’s financial health and risks, leading to a more straightforward analysis.
How Can Blockchain Address These Issues?
Blockchain has many solutions for the issues mentioned above, but how can blockchain be implemented, and how could it be used in the oil industry?
Firstly, to implement blockchain efficiently, companies have to start by listing all their responsibilities and requirements. It would allow for better planning before implementing any solution. The use of smart contracts will allow businesses to avoid human errors and work on high-level solutions that can solve complex problems effectively. Finally, it would improve collaboration among players in the industry, which will reduce the risks of manipulation that are present everywhere.
Blockchain can reduce oil expenses in the supply chain:
The oil industry is a capital and labour-intensive business (which means lots of money outflow). Because of transparency, blockchain can reduce these expenses by making monitoring activities within the supply chain easier.
Blockchain can help improve operations in the oil industry:
Blockchain can help reduce oil industry costs by accelerating time to market, improving collaboration, and reducing costs. In midstream/downstream aspects, blockchain technology helps to get data from multiple sources and store it in one place. It helps to reduce the manual process of data collection, entry, and transfer and dramatically reduces the cost of processing information.
Challenges of implementing blockchain technology in the oil industry:
One of the biggest challenges for blockchain technology implementation would be the industry’s resistance to change. Corruption in the oil industry leads to manipulation of prices, corruption, and misinformation, leading to many countries’ conflicts over natural resources.
Users can use blockchain technology for transparency because it is a distributed system where transactions are recorded at all times. It would help reduce corruption by providing market predictions and monitoring activities within supply chains so they’re not being manipulated.