READING TIME: Gain perspective on the future of the energy industry in under 2 minutes. (Part Three of a Three-Part Series on the Future.)
By George Foster, CEO of Foster Marketing
The first week in May is always reserved for the Offshore Technology Conference or OTC, the biggest event in the oil and gas industry. Unlike last year when OTC followed the Macondo disaster, this year’s show was full of enthusiasm. Attendance reached a 29-year high with more than 78,000 and the exhibition space of 603,000 square feet was sold out.
And, with oil futures passing $110 per barrel and the government now issuing permits in the Gulf of Mexico, things look promising for the energy industry.
In its latest monthly oil market report, the International Energy Agency (IEA) revised downward its forecast for the 2011 global oil product demand growth as a result of persistent high prices and weaker projections for economic growth in the developed countries of the Organization for Economic Cooperation and Development. And, global events shape the future of energy. In fact, oil futures dropped immediately following the death of Osama bin Laden.
So “What is the Energy Future?” Or, maybe more importantly, “Which Energy Future?” That was the title of a presentation given by Andy Hines, lecturer and executive-in-residence for the Graduate Program in Future Studies at the University of Houston, last November.
Andy (http://www.andyhinesight.com) was the featured speaker at a meeting I hosted in Lafayette last month on “Thinking [Better] About the Future: A Hands-on Approach to Applying Foresight” (see Part Two of the Future Series).
In his energy presentation, he laid out four energy scenario archetypes: Continuation, New Equilibrium, Transformation and Collapse. Here’s an overview of the first three; don’t want to imagine the latter.
Continuation: The system moves forward along its current trajectory. This is the “official future” and usually considered most likely. Hines forecasts this is less and less likely, and uses “The Long Boom” by Peter Schwartz (http://www.amazon.com/Long-Boom-Peter-Schwartz/dp/0738200743) as a go-by, suggesting that the recession is just a blip in the 25-year boom. Assumptions:
• Recession ends and things “go back to normal”
• Developing markets are more “markets” than competitors
• Global shipping costs manageable
• Resource costs manageable
• Technology continues to advance rapidly
• Mix of modern and post-modern values
New Equilibrium: The system reaches a balance among competing forces that is significantly different from the current balance. In the “double-dip” or “our-turn” scenario, emerging markets rewrite the rules. Assumptions:
• Emerging markets lead the way out of “double dip”
• Reverse “brain drain” helps build emerging market knowledge work force
• Relations with developed world “manageable” to avoid trade wars
• Required sources can be acquired cost-effectively
• Environmental issues “tabled” until later
• Spread of modern values
Transformation: The system is discarded in favor of a new one with a new set of rules, such as the soft energy path as described by Amory Lovins in his 1977 book “Soft Energy Paths: Toward a Durable Peace” (http://www.amazon.com/Soft-Energy-Paths-Towards-Colophon/dp/0060906537/ref=sr_1_1?ie=UTF8&s=books&qid=1304354600&sr=8-1). The soft energy path describes an alternative future where energy efficiency and appropriate renewable energy sources steadily replace a centralized energy system based on fossil and nuclear fuels. Assumptions:
• Recession causes people to “re-think” their consumption
• Grassroots movements and social entrepreneurship flourish
• New measure of government success at all levels of government go beyond the “Triple Bottom Line” of becoming more sustainable
• Alternative energy investment grows and leads to significant breakthroughs
• Local products and services flourish
• Licenses to operate granted by some communities that require organizations to give back to the community
• Rise of post-modern and integral values
Implications of the Scenarios: What do these scenarios mean to those in the energy industry?
|Implications||Long Boom||Soft Path||Our Turn|
|Economic prospects||Developed world economies lead the way||More balanced economic prospects||Emerging markets lead the way|
|Globalization||Continue to increase||Globalization slows with shift to local emphasis||Potential “trade wars” as emerging markets assert power|
|Energy usage||Up steadily and globally||Significantly reduced growth||Huge growth in emerging markets|
|Energy mix||Conventional with some alternative||Alternatives gain significant share||All possible sources exploited, including nuclear push|
|Work force||Knowledgeable worker boom in developed world drives shortages||Shift in energy mix requires new skills||Improving global reach, skills and capabilities|
In conclusion, the Hines presentation provides thought-provoking situations and implications to help energy companies forecast the future. The heavy lifting comes inside the company to evaluate its own future prospects.
Let us help you plan for 2011 and beyond. Email Jamie Efurd or call 281-448-3435 or 337-235-1848 to schedule a meeting with Foster Marketing to discuss how we can help integrate and enhance your marketing efforts.