<p style="text-align: justify;">Tesoro Corporation, known briefly as Andeavor, was an American Oil Refining and distribution company. Tesoro was an independent refiner and marketer of petroleum products, operating ten refineries in the Western United States. At the time as Andeavor, Tesoro was acquired by Marathon Petroleum on October 1, 2018 (Marathon Petroleum, 2021).</p>
<p style="text-align: justify;">Marathon Petroleum Corporation (MPC) is the leading downstream energy company based in Findlay, Ohio. MPC&#8217;s marketing system includes branded locations across the United States, including Marathon brand retail outlets. MPC also owns the general partner and majority limited partner interest in MPLX LP.</p>
<p style="text-align: justify;">This midstream company owns and operates gathering, processing, and fractionation assets and crude oil and light product transportation and logistics infrastructure. Porter&#8217;s five forces model is a helpful tool to identify threats and opportunities faced by the company in the business world.</p>
<h2 style="text-align: justify;">Competitive Rivalry in The Market</h2>
<p style="text-align: justify;">The downstream industry is concentrated in the world. It results in the furious rivalry between the companies. The US is on the list of the top 10 oil producers of the world (NS Energy, 2020). MPC is the leader in this; it has over 2.9 million barrels per day with 13 oil refiners in the US (Marathon Petroleum, 2021).</p>
<p style="text-align: justify;">These refineries are integrated via pipelines, terminals and barges to maximize operating efficiency. The majority of the industry is ruled by these companies in North America, including ExxonMobil Corp, BP Plc., and Chevron Corp. Major Midstream and downstream companies are relatively equal in size, power, and capabilities (Datamonitor, 2009). MCP posted $88.952 B in 2020, ranked at 32nd number in Fortune 500 (Fortune, 2021).There is intense competition by viewing all these factors and considering a global conglomerate in the downstream oil and gas industry.</p>
<h2 style="text-align: justify;">Threat of Substitutes</h2>
<p style="text-align: justify;">The oil and gas industry is the cause of the significant Greenhouse Gas (GHG) Emission worldwide. Its account of around 9% of total direct GHG emission is linked with the industry&#8217;s operations (Beck Et.al., 2020). The industry is under immense pressure to reduce its carbon emission. Industry is the backbone of economies. Climate activist is forcing companies to halt those projects. There is a high risk of spillage, gas emission, and damaging the earth in exploration, refining, and transportation. There isn&#8217;t any solution available at that moment that can replace or disrupt the industry. The downstream industry explores ways such as energy efficiency and the electrification of low- to medium-temperature heat and energy to save energy and GHG emission. The threat of substitution is low.</p>
<h2 style="text-align: justify;">The Threat of New Entrants</h2>
<p style="text-align: justify;">The oil and gas sector are highly regulated. Governing bodies and government regulate the industry. Higher initial capital investment and the trained staff are a big hurdle for the new entrants. The firms to enter into this industry need to have a solid ability to raise funds, which becomes rather complicated in the presence of substantial sunk costs and high assets (Worthington, 1995).</p>
<p style="text-align: justify;">World oil demand will plateau in the late 2030s and could by then have begun to decline (Reuters, 2020). The investor will not get the return he should because of the availability of other resources and a decrease in demand for fossil fuels. The industry is already saturated, and competition is high. Considering the facts mentioned earlier, the threat of new entrants remains low.</p>
<h2 style="text-align: justify;">Bargaining Power of Buyers</h2>
<p style="text-align: justify;">Buyers can significantly impact a company&#8217;s product and selling decisions. The most substantial power buyers can exert lower prices, affecting the profit potential (Luenendonk, 2019). Oil and gas energy has a complex supply chain, bringing a lot of different companies together. The significant buyers of oil and gas industries are oil refiners, state oil companies, and oil trading and distribution companies. Downstream activities include the storage, processing, and transportation of oil and gas products.</p>
<p style="text-align: justify;">The companies are responsible for building and developing the infrastructure to refine and store the products. There isn&#8217;t any available option for it, and the world depends on the processed products provided by the refineries. All these factors result in minimum leverage to the client. It is to control the quality of certain oil products. The buyer’s only power is getting a better deal.</p>
<h2 style="text-align: justify;">Bargaining Power of Suppliers</h2>
<p style="text-align: justify;">The primary supplier of the industry is equipment suppliers. The oil production equipment directly links with the quality of the product, and malfunction in it can cost losses of millions of Dollars (Porter, 1979). The market is concentrated, and there are not many suppliers who can deliver sophisticated products.</p>
<p style="text-align: justify;">The quality of the product can directly impact the industry. The end product is the backbone of the global economy. The consumers are also limited, so in this case, both depend upon each other. Industry plays a crucial role in oil and gas exploration, and there isn&#8217;t any other solution. The supplier holds moderate to higher bargaining power in the midstream industry.</p>
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<h2 style="text-align: justify;">References</h2>
<p style="text-align: left;">Back. C., Rashidbeigi. S., Roelofsen. O., and Speelman. E. (2020). The future is now: How oil and gas companies can decarbonize. Available at: https://www.mckinsey.com/industries/oil-and-gas/our-insights/the-future-is-now-how-oil-and-gas-companies-can-decarbonize<br />
Fortune. (2021). Marathon Petroleum. Available at: https://fortune.com/company/marathon-petroleum/fortune500/<br />
Luenendonk. M. (2019). Bargaining Power Of Buyers &#8211; Porter’s Five Forces Model. Available at: https://www.cleverism.com/bargaining-power-of-buyers-porters-five-forces-model/<br />
Marathon Petroleum. (2021). Nation&#8217;s Largest Refiner. Available at: https://www.marathonpetroleum.com/Operations/Refining<br />
Marathon Petroleum. (2021). The Marathon Petroleum Story. Available at: https://www.marathonpetroleum.com/About/History/#2003<br />
NS Energy. (2020). The top ten largest oil-producing countries in the world. Available at: https://www.nsenergybusiness.com/features/top-oil-producing-countries/<br />
Porter., E. M (1979). How Competitive Forces Shape Strategy. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy<br />
Reuters. (2020). OPEC, in major shift, says oil demand to plateau in late 2030s. Available at: https://www.reuters.com/article/us-oil-opec-outlook-idUSKBN26T24C<br />
Worthington, P. (1995). Investment, Cash Flow, and Sunk Costs. Available at: The Journal of Industrial Economics 43(1) PP 49-61.</p>
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