The price of oil sends a ripple effect throughout the world's economy, affecting not only drivers who have to shell out at the pump, but other forms of transportation, the cost of all goods and services, and the availability of basics like food and shelter. Oil companies engage in exploration and production of oil ("upstream" activities), oil transportation and refining ("midstream"), and petroleum product wholesale and retail distribution ("downstream"). The largest companies, known as the "majors," are vertically integrated, with business operations along the entire spectrum from exploration to gas stations. Smaller oil companies, known as "independents," are often exclusively involved in exploration and production. Upstream is considered the glamorous place to be, where all the big decisions are made. Upstream jobs also involve heavy international work, with many employees sent off to new postings around the world every three years or so.
Some companies focus exclusively on midstream and downstream activities. They operate refineries to distil crude oil into its many commercially useful petroleum derivatives, like gasoline, jet fuel, solvents and asphalt. Refineries are, in theory, built to last 40 years, but some have been around for as long as 80 years. That means that new refineries are rarely built, and the refinery business is mostly about managing the razor-thin margins between purchased crude oil inputs and revenue from refined product outputs.
Aside from these are the sectors and businesses that feed off of oil. Oil services companies provide a range of outsourced operational support; for instance, they may rent out oil rigs, conduct seismic testing or transport equipment. Equipment manufacturers make turbines, boilers, compressors, pollution control devices, well drilling and pipeline construction equipment, software control systems, and some provide engineering services and construction/installation of their equipment. Pipeline operators own and manage tens of thousands of miles of petroleum (and natural gas) pipelines. Many also operate oil intake terminals, engage in commodities trading and energy marketing, (and own natural gas storage facilities) or petroleum refineries as well. Pipeline companies are not household names; nonetheless, the largest ones take in several billion in annual revenue, comparable to the scale of a medium-sized oil company. The fortunes of these companies follow the price of oil: when oil is expensive, oil companies drill a lot and make a lot of money, so business volume and revenue increase for their contractors.
Oil services companies
Oil services companies provide a very wide range of outsourced operational support to oil companies, such as owning and renting out oil rigs, conducting seismic testing and transporting equipment. The fortunes of these companies follow the price of oil: when oil is expensive, oil companies drill a lot and make a lot of money, so business volume and revenue increase for their oil services contractors. Working for an oil services company can feel very much like working for an oil company, given the similarity in issues and activities.
Pipeline operators own and manage tens of thousands of miles of petroleum products and natural gas pipelines. Many of them also operate oil intake terminals, engage in commodities trading and energy marketing, and own natural gas storage facilities or petroleum refineries, as well. Unlike the major oil companies, pipeline operation companies are not household names -- nonetheless, the largest ones take in billions of dollars in annual revenue, comparable to the scale of a medium-sized oil company.
Public utilities, which are involved in power generation, transmission (from generator to substation) and distribution (from substation to residential or commercial consumer) are, by definition, located all over the country -- everyone has to get their electricity and (natural) gas from somewhere, of course. "Utility" is actually a loose term that refers to all types of companies: investor-owned utilities, government-owned utilities, municipal power companies, rural electric co-ops and independent power producers (IPPs) or non-utility generators (NUGs). Utilities may differ greatly in terms of their lines of business. Some have sold off most of their generation assets and are primarily distribution companies with power lines as their primary assets, while others may own large amounts of regulated power plants, and may also own non-utility generators or individual independent power plants.
Companies produce electricity in a variety of ways, from the simple and natural to the complex. Solar sources (and photo-voltaic cells), water (hydroelectric plants), and below-ground stores of heat and steam (geothermal) are used in the most environmentally uncomplicated methods. Coal can be used as well, although it's messy and contributes to polluting greenhouse gases.
Transmission grid operators
Transmission grid operators, known as independent system operators (ISO) or regional transmission operators (RTO), provide a power generation dispatch function to a regional electricity market. They don't own the transmission lines, but coordinate how much power is generated when and where, such that supply and demand are equal at every moment. This is an extremely complex process, and necessitates the analytical skills of electrical engineers and other generally quantitative and analytical operations staff.
Equipment manufacturers make turbines, boilers, compressors, pollution control devices, well drilling and pipeline construction equipment, software control systems, pumps and industrial batteries. Many of them also provide engineering services and construction/installation of their equipment. The major gas turbine manufacturers, for example, also offer engineering, procurement and construction of entire power plants. Oil-related equipment makers are often characterized as "oil services" firms.
Investment funds are a diverse bunch: mutual funds, private equity funds and hedge funds. Mutual funds hire stock analysts primarily out of MBA programs to track, value and recommend stocks in a particular sector (e.g., energy, natural resources, consumer goods) to the fund managers. However, there are a lot of other finance-related positions inside these massive firms for which graduates are sought.
Hedge funds often hire people out of investment banking analyst programs. They tend not to hire people out of the mutual fund world, given that their valuation approach is so different, their investing horizon is so much shorter, and their orientation many times is towards short-selling, as well as buying stocks. While some hedge funds may focus exclusively on energy, most are generalist and opportunistic with respect to their target sectors.
Private equity funds invest money in private (not publicly traded) companies, often also obtaining operating influence through a seat on the portfolio company's board of directors. As a result, an analyst's work at a private equity fund is vastly different from that at a mutual fund or hedge fund. You are not following the stock market or incorporating market perception issues into your valuations and recommendations; instead, you are taking a hard look at specific operating issues, identifying concrete areas where the portfolio company can lower costs or enhance revenue. A few private equity firms specialize in energy investing, and many more do occasional deals in the energy space as part of a broader technology or manufacturing focus. Private equity firms hire just a few people straight out of college or MBA programs, and many others from the ranks of investment banking alumni.
Banks and financial institutions
Banks are primarily involved in lending money to companies, but they also have their own trading operations, private wealth management and investment analysis groups. Commercial and investment banks arrange for loans to energy companies, as well as syndicate loans for them (i.e., find other people to lend the money). Investment banks manage IPOs, and mergers and acquisitions (M&A) activities, as well.
Consulting firms offer rich opportunities for those interested in the energy industry. Consulting on business issues (rather than information technology or technical, scientific issues) is done at three types of firms: management consultancies, risk consulting groups and economic consulting shops. Consulting firms are often interested in hiring people with good functional skills rather than requiring specific industry expertise and provide a broad exposure to energy sector business issues, as well as good training.
Nonprofit groups are engaged in issue advocacy or public interest research. Advocacy groups may focus on developing grassroots support for public policy changes, publicising public interest issues or problems through direct actions, or working to influence politicians to enact or change legislation. Most of the energy-related advocacy groups focus on environmental topics, though some also cover corporate financial responsibility and investor protection issues. Nonprofits are funded by individual donations and grants from foundations. Accordingly, a substantial portion of their staff is dedicated to fundraising.
Government agencies regulate the energy markets and define public energy and environmental policy. Jobs can include policy analysis, research project management or management of subcontractors. The energy agencies tend to hire people with environmental or engineering backgrounds, and have lately been following a policy of hiring people with general business and management education and experience.
Energy services firms
Energy services firms help companies (in any sector) reduce their energy costs. Working for an energy services firm is similar in many respects to consulting -- except that you go much further down the path of implementation. Typically, an energy services firm first conducts an energy audit to understand where a company spends money on energy: electricity, heat and industrial processes. Then, the firm actually implements energy-saving measures "inside the fence" of the client company. This can involve investments and activities such as putting light bulbs on motion sensors, upgrading the HVAC (heating, ventilation, air conditioning) systems, negotiating better rates with the utility suppliers, or developing a co-generation power plant adjacent to the factory. Often, the energy services firm receives payment for these services in the form of a share in the net energy cost savings to the client.
Job functions and company types intersect in numerous ways -- for example, you can do corporate finance in a large oil company or with a small fuel cell manufacturer, or choose between asset development and trading within a given utility. Below is a summary of the characteristics of the major energy sector employer types: