There are horizontal economic relationships within and between countries and industries, vertical relationships with suppliers and customers, incentives for the oil companies to create the cheapest supply chain for their oil, logistics costs, and compliance regulations. The reliable websites will assist traders in their bitcoin journey with the best trading tools, fast payouts, and phenomenal customer support. The blockchain technology has the potential to reinvent this industry.
This post outlines how it could work. There is a lot of uncertainty around whether this particular industry will use blockchain. But blockchain technology is an unstoppable innovation that promises security and efficiency in trade transactions — something no one wants to miss. The banking system is test-driving it, and private companies like Walmart have also announced blockchain initiatives.
Blockchain is expected to bring new levels of efficiency, transparency, and flexibility to the oil industry’s complex global supply chain management. However, it adds to operational costs and makes operations more inefficient, and introduces an unnecessary management layer into oil commodity supply chains.
Some examples where go-betweens have been eliminated with blockchain technology include trading oil internationally, transferring money, securing documents, and creating smart contracts for various oil chain purposes. One application of blockchain technology in the oil industry would be to eliminate the role of go-betweens like banks, auditors, insurers, and brokers. For example, suppose a supplier has falsified his data in the past. In that case, it will not be possible for him to do so again in future transactions because of the immutability of data entries on the blockchain.
What changes can blockchain bring if it gets adopted in the oil industry?
Disintermediation in the oil industry:
The oil industry is a complicated one, and there are many different players whom all have different roles to play. Blockchain has the potential to disrupt the entire industry; in short, blockchain enables companies to remove intermediaries from the process of trading goods and services by lowering costs and increasing transparency. It will make it much more difficult for someone to cheat in a transaction because they will be sure that all information presented is accurate and has not been altered. In the oil industry, go-betweens have been eliminated not just because they add unnecessary value to transactions but also because they can be exploited by the parties involved.
The reduction of operational costs:
Removing intermediaries and using blockchain technology will cost money. But instead of spending money on traditional third-party vendors, companies can spend their resources on creating better supply chains and products rather than dealing with these middlemen. It will ultimately result in lower operational costs for all participants involved in the chain and reduce unnecessary administration costs.
The ability for companies to track their suppliers:
In the oil industry, many suppliers use different systems to track the status of their supplies. In addition, companies possess several databases and more data that they can tie together, making it difficult to track where a commodity belongs in a supply chain. Blockchain technology can help reduce this complexity and make it possible for companies to have an accurate view of where every single commodity they purchase comes from and also ensure delivery is made on time.
The elimination of fraud:
The fraud ratio is very high in the oil industry for many reasons, such as poor management practices by companies, lack of transparency on deals with intermediaries, shipment delays, etc. It will make it difficult for fraudsters to cheat in any transaction because all information will be visible and unavoidable.
The reduction of prices:
If all parties involved in the supply chain use blockchain technology, the risk of fraud can be reduced, and prices can go down significantly. In addition, a 24-hour market could emerge with no intermediaries because of smart contracts (programmable contracts) written on top of blockchain software.
Energy and commodity trading:
The use of blockchain in the energy and commodity markets will allow consumers to buy directly from producers, which will result in the removal of intermediaries who add unnecessary costs to the purchase price and make it much easier to send payments directly to suppliers at all times. In addition, it removes many problems, such as delayed payments, high-interest rates on loans, credit risk from lack of information on suppliers, and potentially low prices.
The speed of the transactions:
Blockchain technology allows for real-time data tracking with no need for reconciliation or auditing, thus making the entire process faster. As a result, there would be a significant reduction in delays associated with delivering goods and money and an increase in transparency across all levels of trade. For example, in the oil industry, people can achieve this by removing intermediaries who add unnecessary costs to the purchase price.
As already discussed, blockchain technology can help reduce fraud in the supply chain, from oil businesses and governments to all parts of the oil industry and all different types of players. It will result in savings on the cost of audits and insurance and cut down on cleaning up after the fraudulent activity. Another benefit of using smart contracts is that it will make it impossible for a supplier to sell fake or duplicate products if they are registered on blockchain ledgers accessible by other sellers.