In the last three years, more than 350,000 people are estimated to have lost their jobs in the global oil and gas industry as the prolonged downturn in commodity price morphed from ‘lower for longer’ into ‘lower forever’.
In those cities and regions worst hit by the fall in oil and gas business (Aberdeen and Houston and Stavanger in particular) the impact has been very visible and real. Ask any taxi driver or hotelier in these cities what impact the downturn in the oil industry has had on their business.
However, outside of these clusters of oil and gas activity, the wider world has shown little interest in oil’s plight. Indeed, for those who don’t make a living from the black stuff, the drop in oil prices, which in turn led to reduced petrol prices with potential knock on benefits in the cost of goods and services, has been welcomed.
When industry body Oil and Gas UK estimated that 120,000 oil-related jobs could have been lost between mid 2014 and the end of last year, there were few outpourings of grief beyond the boundaries of Aberdeenshire. If that had happened in any other industry, what would the media and wider public reaction have been? Imagine the uproar if we had lost 120,000 journalists or politicians or teachers or nurses? Why is there such antipathy and even hostility towards a sector that is essential to all of us?
This lack of love for oil and gas is not new. From its earliest beginnings (certainly since the days of John D. Rockefeller) oil has struggled with its image, and its attempts to convince the wider world that it is anything other than mad, bad and dangerous to know have often failed.
Governments have traditionally regarded oil as a cash cow (in 2012-2013 the industry paid £6.5billion in taxes to the UK Government) to help boost expenditure elsewhere. We know of its importance in enabling mobility and transportation, with the associated economic benefits. And it provides us with heat, light and plastics to name just a few advantages.
Unfortunately, the oil industry has often come across to the outside world as old fashioned, occasionally dangerous, introspective, smug, arrogant, matey or even macho – criticisms that could have been labelled at Rockefeller’s Standard Oil company 100 years ago. They didn’t call it crude oil for nothing.
‘Big Oil’ with its global reach and lack of boundaries has been seen as intertwined with geopolitics, sometimes even wars, dominance, exploitation and power. The appointment of former ExxonMobil president Rex Tillerson as U.S. Secretary of State is the most recent example of the apparent bond between the oil industry and governments.
But the last three years have taught the industry much; not least that it couldn’t continue to operate in the same profligate and insular manner as it had in the past.
The recent Energy Symposium, hosted by the Price College of Business Energy Institute at the University of Oklahoma, heard the oil industry and the world must adapt to the notion that, thanks to U.S. shale, we have moved from an era of resource scarcity to one of abundance, with its clear impact on commodity pricing levels.
This means that companies working in the modern oil industry – which for so long has regarded itself as ‘different’ to other sectors – have to be run like any other business, focusing much more on customers, competitors and price points, rather than projects. Importantly, and again like all other business sectors, oil has to embrace new technology and, in particular, take digitalisation seriously.
For effective examples of sectors which have faced challenges in recent years and evolved, adapted and responded to their markets to overcome them, oil need look no further than the motor and aerospace industries.
Thankfully, there is evidence of refreshingly new customer-orientated business models being adopted by oil companies, particularly in the service sector. These are being led by data-based intelligence with technological and commercial innovation at their core.
The essence for the modern oil industry has to be to work smarter and to work together. In terms of technology adoption, for example, instead of being part of the ‘rush to be second’ companies should have the confidence and drive to be in the rush to be first, or equal first at least, as we move from the mad, bad and dangerous reputation to an industry that’s clean, safe, affordable and sustainable.
Oil has to prove that it’s changed; that it knows its place in the wider world and that it’s the most exciting and innovative industry to work in. It must also acknowledge an awareness of the bigger energy picture, and have the confidence to take up its essential role in helping the world transition from high carbon to low carbon energy sources and ultimately to renewables.
There are companies already working in this area, but a greater cultural shift coupled with a degree of humility may help the oil industry attain the wider recognition many in it feel it deserves. Crude oil must become smart oil.
Andrew Bradshaw is the head of energy insight and Peter Lyall is group director, strategy, at integrated corporate communications company Fifth Ring
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