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Thursday, February 18, 2016

Oil Major Executives need to stop dreaming and reinvent their businesses…

Quoted by the Financial Times on Valentine’s day: “Philip Verleger, an energy economist, argues that ‘nightfall is coming’ for big oil companies, threatened on one side by the rise of renewable energy and climate policies that will curb the growth of fossil fuel demand, and on the other by the smaller, nimbler companies that lead the shale oil and gas industry.”

“The companies that are wedded to high-cost projects, like deep water in Brazil, are going to have to take some large write-downs,” he says. “The likelihood that those investments are going to pay off over the next 20 years is extremely low.”

Companies that put their hopes on a strong rebound in oil “aren’t going to make it”, he adds.

In fact anyone who has watched Jeremy Rifkin’s presentation on the Third Industrial Revolution & a Zero Marginal Cost Society (view it here: https://youtu.be/5mQj574Cv_k ) will realise that fossil fuel prices will not recover sufficiently to make current or future oil-major funded and developed large projects viable.

Oil Major Executives should abandon their pipe dreams about the golden days of crude prices returning, as they did before the previous price dip crises; el Dorado will not rise again from the mists of the future.

There is an oil glut because oil is in less demand; a fundamental shift towards renewable sources of energy has taken place and is gathering speed.

Oil Exec’s should take on-board Ms Nadya Zhexembayeva’s advice and reinvent their business models; her short but telling evocation to reinvent can be viewed here: https://youtu.be/f4kySpcdvFg

It is time to acknowledge that Change has Changed and to Embrace the Exponential.

Investing in renewable energy production, storage and distribution infrastructure is the only viable future strategy for the medium and long term.