Question

In the natural gas industry, low average total costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market.

True or False

Answer 1

True

Step-by-step explanation:

The barriers to entry in the oil and gas sector are extremely strong and include high resource ownership, high startup costs, patents and copyrights in association with proprietary technology, government, and environmental regulations, and high fixed operating costs. In the oil and gas sector, barriers to entry are high when it comes to the research and capital investment in exploring for new oil sites, obtaining the land and drilling rights, and then extracting the oil.