Three Myths About the Oil and Gas Industry’s Future and How To Counter Them
- Alex Epstein (Center for Industrial Progress)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- March 2019
- Document Type
- Journal Paper
- 32 - 32
- 2019. Copyright is retained by the author. This document is distributed by SPE with the permission of the author. Contact the author for permission to use material from this document.
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Special Section: The Value and Future of Petroleum Engineering
What are the most important trends in energy? If you follow mainstream press accounts, there are at least three:
- The oil and gas industry will soon face radical restrictions as countries respond to climate change.
- The rapidly growing electrical vehicle market will make oil obsolete.
- The world is quickly moving toward 100% renewable energy.
All of these supposed trends are part of an overarching narrative that says we are in the midst of an energy transition: the world is moving quickly and inevitably away from “dirty” fossil fuels to “green” solar, wind, and batteries.
Regardless of whether the “transition to renewables” narrative is true, the wholesale belief in that narrative poses a threat to oil and gas companies. A recent survey of top fund managers, including BlackRock and HSBC, found that 90% believe international oil and gas companies will be negatively revalued in a few years because of climate and energy transition risks—and many think this negative revaluation has already started.
What’s more, the belief that the industry’s days are numbered will make it increasingly difficult to find and retain top talent—a crucial priority at a time when the industry is already facing the challenge of coping with the “great crew change” brought on by Baby Boomer retirements.
One major way the industry has responded to this is to talk about the benefits of its work: about how oil and gas power our homes, cars, data centers, and hospitals, and about how the industry creates millions of jobs and billions in tax revenue.
All of that is true. But, by itself, it does not counter two core premises:
- That oil and gas are easily replaceable by solar, wind, and electric vehicles, which means these benefits are not unique to oil and gas but apply to all sources of energy.
- That oil and gas have catastrophic costs—on our health, our environment, and our climate—which means that even significant economic costs of transitioning to alternatives could be worth it.
When I give training workshops to the oil and gas industry on persuasive communication, one of the key concepts I teach is what I call superiorizing. You can’t just talk about the benefits of your product: you have to explain how your product has a superior cost/benefit combination to the alternatives.Imagine that you sold smartphones and your pitch was, “Our phone is amazing. It makes calls, it holds your music, you can surf the internet.” Well, so does every other phone on the market. Customers won’t buy your phone unless they believe it is superior to the alternatives. That is why Apple doesn’t just talk about the iPhone’s features, but about how they compare to a Samsung or a Google Pixel.
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