Oil price slump: opportunity or threat?

Read on for a full analysis of the results of the poll. 

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair…”

Charles Dickens wrote those famous opening lines to A Tale of Two Cities in 1859. He referred, of course, to revolutionary France in the late 1700s and a world caught in a huge vortex of upheaval. It’s not hard to use them to aptly sum up the state of the oil economy in the early 21st century with particular reference to the recent shenanigans in the global market in recent weeks.

We’ve had doom-mongers – otherwise known as Morgan Stanley analysts – this week predicting $43 per barrel by next summer unless OPEC wakes up and smells the coffee. Is this wisdom or foolishness?

It will take belief, or maybe a leap of faith, and the nerves and skill of a poker champion to come out ahead over the next 12 months as the industry recalibrates in what may be a season of Darkness. BP didn’t dispel fears with its announcement that it was accelerating plans to axe hundreds of its middle managers. The flip side of that grim news is that BP employs 80,000 people, so its perhaps foolish to cite it as a harbinger of doom for the industry.

Our recent Fifth Ring survey asked whether the falling oil price would affect people’s business plans in 2015. 60% said it would, with 40% believing that it wouldn’t significantly alter their thinking into the New Year.

One respondent wisely stated that resilience built up through diversification of services and having strong contingency plans are key to weathering the expected storm, which of course is a sound observation. The challenge comes for businesses trying to interpret a situation that is still very far from stable. Past experience from previous “down cycles” tells us that there are always winners
and losers.

How companies adapt, survive and indeed thrive – as some will – will determine whether they are set for a long winter of despair or can look forward to a spring of hope and a season of light.

For more, read our original article around oil prices:

Oil price slump: opportunity or threat?  
Published November 19th 2014

At the risk of stating the obvious, for anyone working in the energy industry a plummeting oil price is bad news. Or is it?

In 2009, the oil price dipped below $50 per barrel. In just six years that price increased by almost 200 per cent. Now the crest of the wave has crashed on the rocks of a global slow down and geo-political volatility, and there are fears that $70 per barrel is looming. It remains to be seen whether this is a temporary dip or longer-term trend.

Google search oil price slump analysis and you will have approximately 865,000 results returned – which likely reflects the number of different opinions as to the causes and effects of the plummeting price.

By recapping what we do know - a slow down in global growth, the United States revelling in the prospect of  energy self-sufficiency and an extraordinary period of political and economic uncertainty – it becomes clear that for those who make their living from the energy business it’s going to be difficult to steer a course through choppy waters medium term.

No doubt there are already many shrewd minds spotting an opportunity. If necessity is the mother of invention, then cheap crude focuses the minds of the most inventive in oil and gas – working smarter and faster can bring tremendous rewards once the margins recover.