During the three years to 2014, the price of oil and gas pipeline construction has increased rapidly due to strengthening demand and rising operating costs for suppliers
Los Angeles, CA (PRWEB) February 14, 2015
Oil and gas pipeline construction has a buyer power score of 2.4 out of 5. This score reflects a negative purchasing environment due to rapid and volatile price growth and a lack of available substitutes to these services. However, the high level of competition slightly alleviates negative pressure on buyer power.
During the three years to 2014, the price of oil and gas pipeline construction has increased at a rapid rate. “Prices have undergone fast growth primarily due to rising operating costs for suppliers and strengthening demand brought on by increasing levels of oil and gas production. As such, buyers in hopes of securing a contract during a price dip have gained little to no benefit in delaying purchases,” according to IBISWorld business research analyst Ian Buchanan. During this period, the price has also displayed extreme levels of volatility, which has presented buyers with a high risk of facing sudden price fluctuations. Consequently, buyers have had difficulty creating accurate cost estimations and budgets during the past three years.
Further harming buyer power is the lack of practical alternative to oil and gas pipeline construction. Oil and gas extraction firms require efficient methods of transporting extracted commodities from the well site to a refinery. Oil and gas can be transported via trucks, railways and ships, though these methods are not perfect substitutes and pipelines are still often required at some phase of the transportation process. As such, pipelines must be constructed. “Knowing that buyers do not have any alternatives, suppliers gain pricing leverage and buyer power is weakened. Although there are no practical alternatives, buyers have an extensive choice of vendors to choose from,” Buchanan says. Out of the many suppliers operating in this market, the top four vendors control little market share, indicating a low market share concentration and a competitive environment. Globalization is not uncommon amongst the largest vendors. For example, CH2M Hill, Bechtel Corporation and EMCOR Group are based out of the United States and have operations that span across the globe. The competitive nature of the market pressures vendors to offer reduced pricing to avoid being undercut by competitors. Consequently, the high level of competition among suppliers slightly offsets the weakened buyer power that stems from the lack of substitutes for oil and gas pipeline construction. For more information, visit IBISWorld’s Oil & Gas Pipeline Construction procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of oil and gas facility pipeline construction services. Providers of these services build piping designed to transport oil and gas from one location to another. Suppliers in this market provide construction services for onshore pipelines, both above ground and below, and offshore pipelines. This report excludes pipeline maintenance services and cathodic protection services.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.