Ensuring that all parties are paid appropriately and treated reasonably can be a big challenge in the oil industry. Platforms like OilProfit come up with the best trading algorithm that is highly suitable for beginner bitcoin traders. Using blockchain shows excellent promise for simplifying the whole process, making it faster, more reliable, and easier to audit.
It could also help address the problem of fraud in the oil industry. The problem has worsened as platforms have become more sophisticated. Still, with blockchain-based intelligent contracts providing immutable evidence of transactions between buyers and sellers, breaches like this might not matter because it's still hard to shift money without a corresponding transaction being recorded on the blockchain ledger. In the oil industry, where several players and parties control the systems, it's easier to insert fraud with the data on the blockchain.
Evolving the Oil Industry through Blockchain
Blockchain has been used in the oil industry for quite some time now. A few large companies, such as BP, have had some form of blockchain-based back office system for a few years now. But this is only sometimes everywhere in the industry: there are still many oil companies without a working blockchain system all these years later.
It is a problem because the oil industry is currently experiencing a shift and is seeing an emergence of new technology, innovation and the rapid growth of new companies entering the space. Experts predict these trends will also continue to grow in this decade. But, unfortunately, it means that in a few years, companies might still operate in precisely the same way as they do today, and there will likely be even more "paperwork" involved.
The gap between what's happening within oil companies and what blockchain offers could leave them unprepared for this shift. It may mean that new entrants will emerge to take them on—which is what many oil companies fear.
The most apparent advantage of blockchain in the industry is cutting out the need for intermediaries such as banks or other financial institutions when transferring money. It can be hugely significant for international transactions and any transaction involving differing currencies. Blockchain enables transactions to go through directly from one party to another, removing any middlemen in the process. It is a big deal because, in the oil industry, around half of all costs come from transport and fees related to money transfers due to their cross-border nature. Blockchain can offer huge savings by eliminating these intermediaries and cutting out the costs of using the same system to transact money.
Economies of Scale
The other argument for blockchain in the oil industry revolves around its potential to reduce operating costs. The oil industry is a notoriously capital-intensive industry and, by nature, has a high operational cost component. With blockchain you can eliminate some of these costs through the use of smart contracts to automate specific parts of the process, allowing companies to take advantage of economies of scale across their entire value chain network.
Another way that blockchain may help oil companies is by offering the opportunity to access new markets and find new customers. Blockchain can create a more transparent and auditable oil chain, which in turn improves reputational risk. Companies will hopefully be encouraged to engage with blockchain as they will face fewer barriers when selling their goods.
The oil industry is an industry in which innovation has always been on the right side of history. And the blockchain gives rise to more opportunities for innovation. Being able to make direct payments, having a transparent but secure process, and ensuring provenance and immutability of all transactions from A to Z, when it comes to the oil market, the benefits are clear.
Blockchain is appealing to the oil industry due to its interoperability:
Blockchain technology provides a common platform for all participants. This interoperability is attractive for many industries. For example, it is essential to move data between parties in different countries and from multiple organizations in the pharmaceutical industry. In such a scenario, it is crucial to have no data exchange or management limitations. Blockchain technology allows smooth and secure transmission of information and ensures its authenticity and confidentiality.
Blockchain for Oil Industry - 3 Major application areas:
- Sales & Inventory Management:
Transactional Records (purchase, sale) are immutably recorded on a blockchain, while companies can track real-time stock availability through IoT sensors.
- Finance:
People can use blockchain to record contracts, transfer money, and handle payments and quantities of goods.
- Contract Management:
It is a big area where companies in the oil industry can use blockchain. In the crude oil trading chain, the parties involved are often many. The process of collecting the data from all these parties will help to improve efficiency and reduce costs. Also, using smart contracts for each contract could guarantee its integrity and allow for automatic payments depending on predefined rules.
As such, this function can dramatically improve contracts' efficiency across the value chain and significantly simplify documentation for legal and operational purposes (fraud/misrepresentation).
