Estonia’s petroleum sector is not spared from these long-term economic, social, and technological changes. You can check Bitcoin and energy consumption to learn more detailed information. Despite the efforts of Estonia to adopt innovative technologies, many infrastructures have not yet been adapted to the digital era. The E-Residency program has fostered dialogue between all parties in the oil and gas supply chain.
The state of Bitcoin at present poses a challenge for Estonia as well. Estonia’s leading oil company won’t touch bitcoin due to its volatile payment methods and legal implications for tax collection. The petroleum sector has also expressed doubts about using emerging technology. It is likely because the Estonian government has not yet confirmed a legal framework for regulating cryptocurrency in general.
The Petroleum Supply Chain
Oil companies have increasingly adopted blockchain technology to create efficiencies and mitigate risks. According to a report, about 35% of oil companies either adopt or plan blockchain for supply chain efficiency. The implementation of blockchain technology can lead to increased productivity, transaction costs, traceability, and transparency. All these will increase the business value of supply chain participants.
From a global perspective, the value of shipments handled by ocean cargo carriers has been steadily increasing, reaching $3.9 trillion in 2017, according to the latest report by the World Shipping Council. In addition, the average time it takes for goods to reach their destination has also decreased due to technological advances.
According to IBM’s study on global trade, 90% of goods are shipped by sea, air freight accounts for less than 5% of shipments, and land-based transportation is almost non-existent. The Baltic Dry Index (BDI), which measures shipping freight costs over a set period, has also increased and reached unprecedented levels, as shown below. Figure 1: The Baltic Dry Index
The rising cost of transactions in global trade is a significant concern for governments and large corporations like Exxon. However, exporting also presented increased costs due to rising tariffs and a lack of competitiveness, with their profits shrinking by 59% between 2011 and 2017.
Oil companies have also been investing in alternative technologies and improving their efficiency to reduce their inventory levels, such as Exxon’s recent partnership with Hyperloop One for the transportation of liquefied natural gas (LNG) from the US to Asia.
Furthermore, using bitcoin was also cheaper and more efficient than using Estonian kroons (EUR).
Bitcoins as an alternative to fiat currency in Estonia
The Estonian oil industry has used Bitcoin for over a year. The share of bitcoin payments in the overall revenue of the petroleum sector remains very low, accounting for 1% of all transactions. However, this figure is increasing and is expected to reach 10% in the next few years.
This trend can be attributed to Estonia’s favourable stance towards cryptocurrencies and the introduction of the e -a residency program, which allows anyone worldwide to set up a company online in less than 24 hours and pay taxes online. The adoption of bitcoin can be explained by why companies use bitcoin as a way to make payments. However, it is an uncertain externality and oil companies have not yet adopted Bitcoin to its full potential.
What is the future of the petroleum sector in Estonia?
The digital revolution has broken down traditional trade walls and opened up a world of new possibilities. For example, Estonia’s petroleum sector funds the state budget and is a critical player in the economy. As technological advances allow for lower costs in transactions, oil companies like Exxon will be able to compete more efficiently with other businesses and expand their business on a global scale with decreased costs.
Estonia’s Ministry of Economic Affairs has taken a proactive approach in moving toward blockchain technology and cryptocurrencies. The Estonian government is currently working on drafting the necessary legal framework for utilizing blockchain, creating the e -residency program to encourage the use of digital currency and developing a national cryptocurrency for Estonia. The state of Bitcoin at present poses a challenge for Estonia as well. Estonia’s leading oil company stated that it wouldn’t touch bitcoin due to its volatile nature concerning payment methods and legal implications for tax collection.
The Estonian government will meet these challenges head-on and may serve as a lesson to authorities worldwide. However, the Petroleum sector also has doubts about using emerging technology. It is likely because the Estonian government has not yet confirmed a legal framework for regulating cryptocurrency in general.
However, it is essential for companies involved in global trade to keep up with emerging technologies and use blockchain innovation not only for cost efficiency but also to increase efficiency and productivity.
There needs to be a collaboration between all stakeholders in both public and private sectors, as well as international partners.