AbstractsEconomics

The European downstream oil sector has seen drastic changes over the past years and particularly after 2008 and the outbreak of the financial crisis. The developments which have taken place have put the sector under serious pressure, which was mainly felt by the European refining industry. In a nutshell, the industry has been greatly affected by the declining demand for oil products in Europe, the imbalance between gasoline and diesel supply and demand in the European market, the changing crude oil qualities with which European refineries are being supplied, the refining overcapacity in the region, the thin margins and high energy costs and finally, the stringent environmental legislation of European Union about oil fuels. Additionally, the sector faces increasing competition from its counterparts in the US, Middle East, Russia and other emerging countries in Asia, not only in Europe but also in other global markets. However, companies involved in European downstream oil sector react differently to these challenges and whereas some are divesting, others are able to see investment opportunities. Moreover, some companies involved in the petroleum refining, oil products storage and trading business, are moving from refining to trading and vice versa, thus switching their business models and responding with different strategies to the dynamics of this sector. The spectrum of drivers behind corporate decisions concerning these strategies is quite wide, and this research has aimed to identify which are the important incentives underlying the decisions of these companies. The study effort comprises two main phases; in the first, the unique characteristics of the European downstream oil sector are described with the use of theory. Two theoretical frameworks were used: The Transaction Cost Economics (TCE) and Transaction Cost Regulation (TCR). The constructs offered by these theories were critically evaluated for their applicability with respect to the goals of this research, and after considering their limitations and strengths, a new theoretical framework was proposed. This framework combines elements from both TCE and TCR, and it is customized to depict the idiosyncratic nature of this sector. Furthermore, this framework is suitable for describing the nature of industries similar to the European downstream oil one. For the second phase of the research, the Q methodology technique was employed. At first, the constructs of the theoretical framework helped to identify, from the literature, the important drivers for corporate investments or divestments in the European downstream oil sector. Subsequently, 13 Q methodology interview sessions were conducted with individuals-experts on the topic. Interviewees were related to private and public parties, but also to research organizations. The interviews revealed similarities and differences among the viewpoints of participants, with respect to what is driving corporate investment or divestment decisions in the sector. A comparison and discussion of the different viewpoints…