High oil prices – an assessment of the possible effects to global multinational enterprises
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School of Economics |
Master's thesis
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Date
2010
Major/Subject
International Business
Kansainvälinen liiketoiminta
Kansainvälinen liiketoiminta
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Degree programme
Language
en
Pages
119
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Abstract
This study focuses on the effects of high oil prices to multinational enterprise (MNE). As the global climate change has made energy related issues popular, it has also stimulated the debate over the peaking of oil production and the future of oil based economy. There is a lot of speculation about these topics as nobody knows the exact situation of the remaining oil reserves. High oil price, which is usually a result from tight oil supply, can affect negatively to the whole global economy. Thus it is important and interesting to assess how the high oil prices can affect the globally acting multinational enterprises. The modern and global MNE was first modeled by using a global strategy framework and the theory of global production network. The oil production peak predictions and their background were critically assessed and a picture from the oil supply and the price formation was consisted with the aid of related literature. The main insight from the literature was that as cheap conventional oil becomes more difficult to find, the oil supply remains tight in the future. The price formation of oil was revealed to be affected by multiple factors and its long term development is difficult to predict. The possible effects of the high oil prices were then derived from the expert literature related to peaking of oil production and high oil prices and a data content analysis made by the author. The data consisted of annual reports or Form-10Ks of 50 major MNEs from fiscal years 2008 or 2009. The content of these documents were possibly affected by the record high oil prices of 2008. The companies were picked from The Global 2000 list by Forbes. The main results of the data content analysis were that although the companies mentioned oil and oil related effects, the linkages between business operations and oil were generally indirect. MNEs were found to pursue energy efficiency and lower emissions rather than reduce oil dependency. Finally, a framework was created which illustrates the high oil price effects on global strategy and global production network, with the aid of reviewed literature and results of data content analysis.Description
Keywords
oil, multinatinonal enterprise, energy, global strategy, global production network