With industry specialists in various strategic positions, the entire process of crude oil trading is nearly seamless. Learn how three-quarters of Bitcoin investors lost money. But a critical factor of these transactions, crude oil, does not have a single universal tracking system.
With an intrinsic link to the geopolitics at stake for each country and its suppliers, economic and political ramifications come with this lack of transparency. Blockchain has been suggested as a potential solution to improving the supply chain process involving crude oil, with many companies investing in developing and implementing platforms for this purpose. Whether or not the blockchain is viable for improvements will determine whether it becomes just another fad or a long-term solution on the global stage. Oil and geopolitics
Crude oil is an industry entrenched in the geopolitical realities of the countries and organizations it serves. For example, for decades, Saudi Arabia, a key player in OPEC, has had a strong relationship with most of its partners. On the other hand, Venezuela has been facing economic sanctions from the US for several years due to its political stances. But even still, Venezuela relies heavily on oil-based funding to support its economy. It, therefore, needs to continue working with some major producers to secure crude oil prices.
Supply chains and oil trading:
Every country with a stake in global crude oil production deals with these higher-level issues. Their domestic supply chains are used to bring oil and other resources to the market, and they must continue this practice to keep their economies afloat.
But these domestic supply chains are not the only ones that need to be managed. The global market relies on a constant influx of oil from different countries, and every country also has buyers with which it needs to work for its oil to hit the international stage.
Any problem within or between these companies or governments can cause or contribute to fluctuations in crude oil prices at all chain levels. It creates instability in the global economy and opens up opportunities for those who want or need political leverage over other players in the supply chain. However, blockchain could provide a measure of transparency through which such power could be more easily achieved.
The Impact of Blockchain Technology on the Oil Industry
Blockchain can play a significant role in the supply chain process by providing transparency, efficiency, and trust among the players involved. Therefore, it is understandable why companies like Shell and Royal Dutch Shell would invest in research around blockchain technology to improve their image and fight against accusations that they are negligent with climate change.
But blockchain also enables companies to cut costs by processing transactions more quickly and providing more information about the state of their shipments. Its adoption could also eliminate long paper trails involved in many transactions, which can be a security risk.
Blockchain technology can also allow these companies to operate across borders without relying on intermediaries, which may increase their exposure to various regulations and legal actions. However, the progress will eventually allow for better insight into all supply chain areas involving energy resources.
Product tracing through blockchain:
One of the most significant issues with supply chain data is tracking the product from its point of origin through all stages of its journey. For example, if you buy something from a store, there are numerous ways in which you could lose track of it and become uncertain as to what happened to it.
For example, if you are trying to return a faulty item or it does not fit right, you must prove that it was returned. If the owner claims he doesn’t know where it came from, there are no other reasonable options than to assume that it was stolen. Blockchain could make this process more efficient through its ability to help track products throughout their lifecycle while still providing a high level of security.
Blockchain for Transparency in Oilfield Assets:
The transparency brought by blockchain can lead to a more significant number of points in the supply chain where there could be a clear insight into the state of the assets being used to get your oil from point A to point B. With more visibility into the history of certain assets, you could make better decisions about what you can do with them as a consumer and even as a manufacturer. You would also be able to see where certain products are coming from and decide whether or not that is a good fit for you or your customers.
Real-time commodity trading:
Trading in the commodity market is a complicated process that involves many intermediaries. The current system is ineffective at properly managing supply, demand, or pricing. It causes problems for all parties and makes it difficult for investors to get the most out of their money.
Much analysis and research have been done on blockchain as a possible solution for this problem, but so far, there has been very little actual use from the public. However, some of the major players in the industry are already starting to use blockchain technology to track their stock, and it is an area that deserves more attention to understand its potential fully.