What drives revenue growth in this industry (i.e. more units sold, expanding geographic reach, lower costs for manufacturing, etc.)?
Even during a struggling economy, the energy industry has continued to deliver positive results for revenue growth. Consumer behavior will always affect the success of the energy industry in our economy. When consumers are willing to spend more money, they will pay more for natural gas and oil. Improvements in the general welfare of society and a rise in average income will lead to more money being spent on energy. The auto industry heavily correlates to revenue growth in the energy sector as well. When more cars are sold, the demand for gasoline and oil will increase as consumers drive around more often. As consumers are willing to pay more at the gas pumps, energy companies will be able to draw in increasing revenue. The success of the auto industry can therefore create a large demand for gasoline and oil.
One of the most significant factors leading to revenue growth in the energy industry is government/public policy. I found an interesting blog/article about the stimulus that the energy industry creates for government: http://blog.energytomorrow.org/2011/07/the-energy-stimulus.html Fiscal policy that increases taxes will raise the costs of energy and drive down the demand. The energy industry provides an enormous stimulus for the government in the United States. Therefore, finding equilibrium on tax prices can be a complex issue.
Many economists believe the key to revenue growth for the energy industry in the United States is to produce more natural gas and oil domestically. As of July 2011, 43% of the natural gas and oil that is consumed by Americans in produced within our country. Producing more within our domestic borders would eliminate overseas costs and potentially eliminate any difficult trade barriers.
I think this post is a really good, concise explanation of the key points about revenue in the energy industry. After reading I was really interested in the role that government plays in the energy industry because the energy industry always seems to create revenue because it is so important to everyone. A few questions came to mind that I think we could address somewhere in our essay, even though there isn't a specific section about government relations with our industry:
ReplyDeleteWhat is the relationship between the government and the energy industry? Does the government rely on this industry when thinking about a stimulus package? Does the energy industry work with the government to boost the economy, or is the energy industry a stimulus within itself? What are the social responsibilities of the energy industry? What influence does the government have on green energy?
I also agree with Lela on many of the points that she brought up. The energy industry can sometimes be a controversial one considering the overwhelming dependence our country and world has on it. Oil in particular sparks intense debate in politics and scientists, both of which have an impact on how the industry's supply & demand curves can shift.
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