Shell PLC is a British oil and gas extracting, refining, producing, and distribution multinational company. Samuel Samuel, Marcus Samuel, and Henri Deterding founded the energy and petroleum company in 1890. Today, we’ll discuss the PESTLE analysis of Shell Oil Company; it focuses on external environmental factors like; political, economic, social, technological, legal, and environmental factors.
Political Factors Impacting Shell Oil Company
Some of the main political factors in the Shell Oil Company PESTLE analysis are as follows;
I- Political Instability
According to an estimate, approximately 40% of the world’s oil comes from the Middle East and Africa. However, the political environment in those countries like Iraq, Libya, Yemen, and others is highly unstable due to wars, regime change, and political corruption. Political instability would cause a lot of supply chain and distribution issues.
II- Government Regulations
EU, UK, USA, and others are introducing environmental protection regulations to decrease the carbon emission rate. It means restricting and decreasing the consumption of oil and hydrocarbons. For instance, Europe plans to decrease the greenhouse gases and carbon emission rate by 55%. Such policies and regulations are impacting the business of Shell.
III- Political Relations
Shell has established a very good and effective relationship with oil-producing countries like Nigeria, Russia, and others. For instance, Nigeria and Shell are working on a joint venture and developed NNPC (Nigerian National Petroleum Corporation). According to an estimate, the company has approximately 30% of the share in the country’s oil production.
IV- International Sanctions
Along with government policies, international regulations have a profound impact on running the business globally. For instance, Shell is dealing with international sanctions and can’t do business with Russia. The company is withdrawing its capital resources due to international sanctions and regulations.
Economical Factors Affecting Shell Oil Company
Some of the main economic factors in the Shell Oil Company PESTLE analysis are as follows;
I-Oil Price Fluctuation
The oil and gas price market is highly volatile and it keeps on fluctuating its price due to various political and economic factors. For instance, the price of Brent crude oil was 86.50 USD per barrel in 2023; the West Texas Intermediate had a price of approximately 82 USD per barrel at the same time. Price fluctuation and a volatile price market would negatively impact the business of Shell.
II- Economic Recession
The global economy has been going through an economic recession for the past few years. People have limited financial capital resources due to a tight economy and lower employment opportunities. When people have limited resources, they won’t spend it lavishly by traveling.
III- Demand and Supply
OPEC has decreased the oil production rate due to international regulations. It has caused a significant demand and supply impact. For instance, the demand for oil is approximately 102 million barrels per day, and they’ve decreased it to 100 million barrels per day. Higher demand and lower supply of oil is further increasing the price of oil.
Social Factors Impacting Shell Oil Company
Some of the main social factors in the Shell Oil Company PESTEL analysis are as follows;
I-Negative Brand Perception
The consumer market has become highly conscious of environmental sustainability trends. Brand public perception is highly important to the growth of business. For instance, approximately 60% of the customers think that Shell is harming nature and the environment. Such a type of brand perception is not good for the company’s business in the long term.
II- Social Responsibility
Shell is a highly socially responsible brand and the company has taken various community development programs. According to an estimate, the oil and gas brand has invested approximately 1.5 billion USD on education, health, and other economic development programs for locals. It shows the company’s strong commitment to social responsibility, the local community, and the people.
III- Higher Retention Rate
Shell has a better and improved relationship with its employees and workforce. For instance, the oil and gas company has an employee retention ratio of approximately 93%. It is very high compared to many businesses and companies. It shows that the company is engaging in fair and ethical practices and taking care of its employees.
Technological Factors Affecting Shell Oil Company
Some of the main technological factors in the Shell Oil Company PESTEL analysis are as follows;
I-Advanced Technology
Shell is employing the advanced extracting, refining, and EOR (Enhanced Oil Recovery) technology. It has increased the oil recovery rate by 30% and greatly increased the production capacity to a great extent. Shell is also implementing hydraulic fracturing and it has decreased the cost and improved the resource utilization.
II-Digital and Data Analytics
Shell is investing approximately 1.5 billion USD annually in data analytics and digital technology. It has allowed the company to improve the decision-making process by performing various forms of predictive analytical processes. Most importantly, it has allowed the company to decrease its operational costs by 10%.
III-Renewable Energy
Shell has invested approximately over 25 billion USD in renewable energy projects like wind turbines and solar energy. The oil and gas company plans to achieve 25% of the total energy renewable by 2030. The brand has approximately over 5000 renewable energy sites as of 2023.
Legal Factors Impacting Shell Oil Company
Some of the main legal factors in the Shell Oil Company PESTEL analysis are as follows;
Regulatory Compliance
Shell should comply with the legal and regulatory requirements of different countries. It comprises of trade regulations, OPEC policies, international regulations, IPR, labor laws, and others. Regulatory compliance would help the company to smoothly perform its operations without bans, restrictions, and heavy lawsuits.
Environmental Factors Affecting Shell Oil Company
Some of the main environmental factors in the Shell Oil Company PESTEL analysis are as follows;
Sustainability Initiative
Shell has made a strong commitment to environmental sustainability. The company has taken various sustainability initiatives like investing in renewable energy sources of solar panels and wind turbines to decrease the carbon emission rate. Environmental sustainability initiatives would show the company’s strong commitment to nature and the environment.
Conclusion: Shell Oil Company PESTLE Analysis |PESTEL Analysis of Shell Oil Company |External Environmental Analysis of Shell Oil Company | Strategic Analysis of Shell Oil Company
After an in-depth study of the pestle analysis of Shell Oil Company; we have realized that Shell is the world’s leading oil and gas brand. If you are learning about the Shell Oil Company PESTLE analysis; then you should keep in mind the abovementioned external environmental factors like; political, economic, social, technological, legal, and environmental.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.
