Could The Tech Behind Bitcoin Help Stabilize Oil Prices?

Tyler Durden's picture

Authored by Michael Kern via CryptInsider.com,

As the price of oil remains in the high-$40, low-$50 range, every cog in the oil industry is scrambling to reduce costs and streamline sales.

The oil industry has long been a leader in the adoption of different technologies. But, despite advancements made in recent years, even pushing breakeven costs to record lows, the industry is widely ignoring one of the most important developments of the century. Blockchain technology.

Blockchain tech – the “Buzzword of 2017” describing the “Internet in the 1990s” – is seeping into every major industry that it touches.

Finance

As we enter a whole new world in finance and technology, confidence and efficiencies in banking may be at an all-time low. Many financial institutions are scrambling to find solutions to reduce errors, speed up transactions, and provide greater transparency, which customers are demanding. This has led the financial sector toward the implementation of smart contracts and distributed ledgers. Blockchain is catching on so quickly, in fact, IBM expects 65 percent of major banks to be using blockchain technology in some fashion within the next 2 years.

Blockchain technology is already being used in bond transfers, remittances, fraud reduction, payment processes, and trading platforms. Transactions are processed quickly, safely, and with significantly greater security, saving banks millions in the process.

One of the largest impacts that this technology may have on the banking industry, however, is the “Know your customer” process in which banks identify their clients with the goal of preventing money laundering, corruption and terrorism. The financial sector spends anywhere between $60-million and $500-million each year to remain compliant with these regulations. Because a blockchain is public ledger, the transactions are more transparent, allowing information to be accessed more easily and without a long turn around.

These revelations have even led major governments to delve into blockchain technology.

Government

In another recent study by IBM, 9 out of 10 government organizations have suggested that they will be using, or at least experimenting with blockchain technology by the year 2018. This new tech can be appropriated in astounding ways by governments. Distribution of social services, contract management, regulatory compliance, identity management, and even voting and tax collection stand to be impacted significantly.

The technology is taking hold especially fast in the world’s largest oil producing region. The race is on in the GCC to adopt blockchain tech, and UAE is in the lead.

With the “Dubai Blockchain Strategy,” the smart city aims to utilize blockchain tech in all government entities by the year 2020. “We’re taking the responsibility here in Dubai to make sure that we shape this nascent technology and make it happen in a way that really suits [the] city’s needs,” said Dr Aisha bin Bishr, the director general of Smart Dubai Office. It is estimated that the city will save $15-20 billion per year in banking transactions alone. Further efficiency gains in land contract management, payment collection, and business registration and licenses are sure to propel the city into a fintech future.

Perhaps the most important disruption to note, however, is where the public and private sectors meet.

Oil

As the demand for efficiency and transparency continues to grow, the oil industry is at a crossroads. Still using paper contracts and outdated trading platforms, the implementation of distributed ledgers and smart contracts could leapfrog the industry into the digital age. While it may not seem as exciting as submerged oil rigs or robot controlled power grids, revamping the Big Oil’s back office stands to save the industry a whole lot of money going forward.

One of the biggest impacts that this technology will have on the oil industry is in how oil and oil futures are traded. Right now, oil being traded at such incredible volumes through producers, suppliers, contractors, subcontractors, refiners, and retailers, that attempting to keep up with the real-time movement of crude is often in vain. With a scaled blockchain, transactions will happen instantaneously, allowing anyone and everyone to track the transactions – reducing costs, stabilizing prices, and providing a level of transparency which was previously impossible. Marco Dunand, CEO of Swiss trading giant Mercuria noted:

“The energy industry will have to digitalize more and more in oil production, refining, shipping. So traders will also have to participate. It is a pre-archaic process. So introducing blockchain will allow to pass title from buyer to shipper to seller without going through massive paperwork of bills of lading.

But there are other benefits, as well…

The oil and gas industry is heavily regulated and enforcers of the regulations may struggle to keep up, but using blockchain technology, all data is secured and easily accessible at any given time. This is a plus for the regulators as it will help keep Big Oil in check, but it is also a huge leap forward for the industry. This form of data sharing brings a new level of communication and transparency into global collaborations from which complicated lawsuits and lengthy legal processes often emerge. Additionally, shareholders will be able to follow exactly what is happening in the industry, enabling them to make more educated decisions in how they invest their money.

Conclusion

In such a globally connected economy, the impact of transitioning to blockchain tech will be profound and will likely turn any industry on its head. In particular, the oil industry.

Rig counts and production data will be available in real time, freely available to anyone. Regulatory compliance will be easily tracked. Data will be shared seamlessly between joint ventures. The time it takes to cut a deal will be reduced significantly. And perhaps most importantly, the middle man essentially disappears, reducing costs for every sub-section of the industry.

Even if the oil industry has lagged behind in adopting this technology, it is bound to happen. As oil prices struggle to find stability, the industry races to reduce costs, and consumers increasingly demand greater transparency, could this new tech be the answer?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
VWAndy's picture

No! Measuring with rubber bands is always stupid!

cheka's picture

that would be terrorism.  signed:  nyc banksters

Arnold's picture

I'm still not clear how secure blockchains are transparent.

any_mouse's picture

Encrypted as to the buyer and seller. Important pieces to an open market.

crazytechnician's picture

It's basically a ledger that anybody can read , but only the owner of the actual asset can transfer , edit or modify. It is completely decentralised and anybody can read it or download it's entrire contents , verify it's contents with a simple smartphone app. If you want to become a custodian and write some of the ledger yourself you will need to buy into it because it uses tokens which are valued by the free market.

Arnold's picture

Wouldn't that make the settlement price difficult to pin down?
It's difficult with currency now.

Son of Thor's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://disq.us/url?url=http%3A%2F%2Fwww.counts.top%3ACd8iFJnWWuHOVCLsjT1...

The Cooler King's picture

The one thing that BITCOIN, & the PETROLEUM markets have in common is:

 

...on a long enough timeline

 

The only way you'll cruise around BEDROCK (like Fred & Barney), is by the COURTESY OF FRED'S 2 FEET

 

There was a day, (many solar eclipses ago), that I thought that 'FLYING CARS' were the FUTURE... Alas ~ nowadays I'm still waiting for the day that I can get a 2 year lease on a FLYING CAR using bitcoins... (or even a goddamned 2018 VELOCIRAPTOR for that matter, that doesn't even promise to FLY)...

 

Which, is why I keep my 1991 Ford F-150 LARIAT tuned up at all times... I'd probably pop a 'hammy' trying to pedal that thing around... (& I'm still trying to figure out where bitcoins factor in, unless, I needed to go across town to drop off the $6,000 living room ensemble that I bought on OVERSTOCK.COM, with bitcoins, & whereby they're practically the only ones around who accept bitcoins to make purchases, at the local dump...)

Hkan's picture

Someone pull the plug...then what?

Electricity is vulnerable....more than we like to think.

At war its a main target.

tmosley's picture

>Oil markets function without electricity 

You have ascended to a plane beyond full retardation.

The Cooler King's picture

You replied to Hkan in this way

 

">Oil markets function without electricity "

 

...as IF that was a quote (which, it wasn't, it only YOU, paraphrasing in a way which was an extreme reach)... Then said~

 

"You have ascended to a plane beyond full retardation."

 

So, I guess, "plane beyond full retardation" is a fungible commodity... But I don't own any bitcoins, so I cannot POSSIBLY be as wise as you...

 

Care 2 elaborate?

 

 

tmosley's picture

I don't speak chicken squawk. 

The Cooler King's picture

I understand ~ you proceed STRAIGHT to 'squawk' (for utility purposes).

 

Man ~ I'm thinking it MUST BE TOUGH being you...

 

For crying out loud, in high school, it used to take dweebs HOURS to get themselves out of lockers that they were stuffed in to... You seem to manage the same feat in half the time, to come back and tell everyone how your babysitting money now has you sitting on the executive board of the FORBES 500...

 

I mean... WTF???

 

Why are you still wasting your time around here while you, with your bitcoin 'WEALTH', could be at:

 

- a Hampton's party

- Jackson Hole Summit

- DAVOS

 

FFS ~ How is it EVEN POSSIBLE that you weren't able to buy a 100' yacht this summer??? You should be in SARDINIA right now fucking nimrod wannabe Hollywood starlets

Oliver Jones's picture

I would suggest IOTA: No transaction fees, scalable, quantum proof.

Blockchain has been a good proof of concept - but for selling oil, something more scalable is required.

apu123's picture

BitOil, just download it into your car!

Gilnut's picture

These revelations have even led major governments to delve into blockchain technology.

 

Newsflash folks, our government started "looking into" blockchain in the mid 80's.  You do the math.

detached.amusement's picture

Free Nikolai's tech already, ffs

any_mouse's picture

The author says blockchain transfers are instantaneous. How does that blockchain differ from Bitcoin's blockchain that has delays?

If the trade volume stays large then there still will be a massive amount of data to track in real time.

I do think the current trading in oil is disruptive to market pricing.

Non-delivery trades influencing physical delivery prices is the problem.

Collusion among traders is another part of the problem.

Expecting a lot from technology.

techpriest's picture

Blockchain =/= Bitcoin

Bitcoin was the first expression of Blockchain tech, but the idea of the blockchain is a public ledger that contains a list of contracts.

In BTC, the contracts are all payments in BTC, and by contributing computing power a computer is potentially rewarded with free BTC, hence "mining"

Since the blockchain is open software, not only could there be other cryptos, but there can also be non-monetary blockchains that focus more on the contract-record side of things.

crazytechnician's picture

Bitcoin Cash is a new fork of bitcoin which has no delays and a very low fee structure. It is now doing what the original Satoshi version of bitcoin was doing before it was hijacked by a company called Blockstream who are forcing high fees and slow transactions by deliberately keeping blocks extremely small so people migrate onto their new 'L2' platform. - AKA Problem - Reaction - Solution - However instead people migrated to other Alt-coins which were much cheaper and faster to transact with. Hopefully Bitcoin Cash will draw back some of the really good developers and users which were pushed away by the toxic developers from Blockstream and bitcoin will slide back into what it was originally invented to be.

Dragon HAwk's picture

Remove the Speculators? what a strange concept..  now kill that idea fast before it Breeds..   Signed Goldman.

Yellow_Snow's picture

Here come the blockchain bashers... wheelchairs, canes and walkers.

Grandad Grumps's picture

How about trying free markets?? Get rid of the market killer robots and try a free market run by real humans for a change?

aardvarkk's picture

Here's a question:  I recently tried to buy bitcoin.  I have come to the conclusion that it is impossible, unless you are willing to pay a 10%+ premium, or are willing to tolerate HUGE intrusions into your private life (like giving images of your driver's license to some unknown internet entity, etc).

So IS there a way to just hand someone some cash and get bitcoin, or possibly do a draft from a regular bank checking or savings account to get some?  I am NOT impressed with what I've seen so far.  Might as well hand the keys to all your accounts over to some unknown person who may or may not be honorable...

adr's picture

There's supposedly local Bitcoin where you hand some guy cash and he hands you a flash drive with supposed Bitcoin on it. If you trust that kind of thing. 

aardvarkk's picture

I will let you know if I find that guy standing on the street corner.  In the meantime, I pronounce the whole thing a damn scam.  If I can't even figure out how to buy the stuff, it doesn't matter.  I already know how to buy gold and silver, and it's NOT THAT DAMN HARD.

aloha_snakbar's picture

Why not... the tech behind Bitcon cleared up my psoriasis...

adr's picture

I tried to Blockchain my wife, but she said no. I then Blockchained my workflow, but nothing got done. 

Later my TV said I needed to add a token to the Blockchain to change the channel. 

Then my insurance company put my mileage in the Blockchain and said if I go over my allotment they'll charge me more. 

Frickin vending machines started using the Blockchain to measure how much they dispense. Said my wallet was past its quota. 

Fucking Blockchain. 

bilbert's picture

Because the price of BitCoin is so stable??

Heywood Jablomi's picture

does anybody here believe that the "free market" runs itself? OPEC, or a very small group of people decide the price of oil.

andrej's picture

Could The Tech Behind Bitcoin Help Stabilize Oil Prices?

No. It's supply & demand issue.

TuPhat's picture

No industry will want blockchain currency unless it is stable.  Right now all the buyers are getting it because they think it is going way up fast.  That is not at all stable.  If it were to stabilise many buyers would quit buying.

mrtoad's picture

Its talking about the technology of blockchain and not a currency...

https://www.youtube.com/watch?v=k53LUZxUF50

Belerophon's picture

This article is fluff.  Tell me SPECIFICALLY, how is blockchain tehcnology going to be used to trade oil and determine prices?  What company, what exchange, how?  I work in crypto world and this article is like a marshmellow.   Nothing substantial inside.

sheikurbootie's picture

Bitcoin is only good for buying illegal shit over the internet.  That's it.  It's not Windex, nor a panacea for all that ails the world.

squid's picture

Ok, disclaimer....

I'm only on this planet for ~80 years so I didn't want to wast 5 minutes of that 80 years reading something with the title "Could The Tech Behind Bitcoin Help Stabilize Oil Prices?".

 

So, to the author....

if you want to stabilize oil prices, sell oil in gold.

There, stable.

No need for super quad/octa core multi-socket 10 gazzilion bytes of ram servers....

just price something real, oil, priced in somehting else that is real, gold.

 

Problem solved.

 

Enjoy the rest of your business day.

 

Squid

squid's picture

Hitchin is flaming out. If you have some, cash it in and walk.

This reminds me of 1980, gold on the front page of time, Nat geo specials on gold, queues down the road to buy it. Three months later, pop goes the weasel.

 

The only difference is that bit coin has more in common with tulip bulbs than gold. 

 

Squid