Few chief executives are ever willingly prepared to put their companies into run-off. To do so seems an admission of failure. Yet is this not the best strategy for the oil giants BP, Shell, ExxonMobil et al? I ask this question not just for its shock value, but because it is the logical conclusion to draw from BP’s latest “Energy Outlook”. This highlights an increasingly self-evident fact; that despite one time predictions of “peak oil” and other such nonsense, the world is in fact overflowing with oil and other fossil fuel reserves. Today’s known resources dwarf likely consumption out to 2050 and beyond. As a commodity product, oil has to date been quite unusual in that it accommodates both low and high-cost producers. This is largely because supply is deliberately constrained by OPEC and others with an interest in eking out the resource’s income stream for as long as possible. A barrel of oil, it has long been thought, is worth more left in the ground than extracted. The now exponential growth of renewables threatens to challenge this established orthodoxy. Indeed, BP admits in its analysis that quite a bit of today’s known reserves will end up never extracted. The now exponential growth of renewables threatens to challenge this established orthodoxy. Indeed, BP admits in its analysis that quite a bit of today’s known reserves will end up never extracted – music to the ears of the green lobby. The implications are clear: oil producers should make hay while they still can, even at the cost of a resulting glut that depresses prices. In any case, there may be little point in developing new sources of supply, particularly at high cost. Rather, oil companies should be slashing their investment to virtually zero and handing the cash back to shareholders – either that or using their superior credit ratings to invest in renewables.
Telegraph 4th Feb 2017 read more »