Big Oil’s New Mindset

Ben Van Beurden, the CEO of Royal Dutch Shell, said his company had changed its mindset to a “lower forever” price of oil. Perhaps the most significant thing about his new position is that it refers to a change in “mindset,” rather than mere adoption of a new business plan. Van Beurden clearly believes that Shell has to be prepared for a depressed price of oil, and consequently of the oil industry, from which it never recovers. This is a complicated issue involving a wide range of pressures from competing technologies. One competitor for oil is natural gas, in which Shell has long had its position.

Other competitors include technologies that are almost certain to lead us to abandon fossil fuels altogether. These range from walking and biking to using solar and wind power to provide energy for transportation and heating. They include alternatives, such as biofuels and synthetic fuels. They also include efficiency. There is not merely competition for fossil fuels, but outright opposition. These are impelled by a need to deal with pollution and climate change, both of which are currently threatening our health and our financial well-being, and in the future will increasingly threaten our security.

Addressing these problems, fossil fuel companies and utilities have taken a variety of different positions. One is to build a new business plan, working to deliver clean energy to customers while reducing costs. In Vermont, Green Mountain Power’s CEO Mary Powell has been doing this. Another approach is the one followed by DONG Energy, which has been giving up its oil and gas holdings altogether after making itself a world leader in the field of offshore wind power.

At the other end of the spectrum are those organizations whose leadership has asserted that their companies will not be affected by changes in the field of energy. Exxon’s former CEO Rex Tillerson, who is currently the U.S. Secretary of State, told his shareholders at the annual meeting in 2016 that they did not need to worry; no assets would be stranded. The shareholders found out within months that he was wrong on assets of over two billion barrels of oil.

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