Exxon’s Dangerous Energy Vision

 “Forecasts are not always wrong; more often than not, they can be reasonably accurate. And that is what makes them so dangerous…
They often work because the world does not always change. But sooner or later forecasts will fail when they are needed most: in anticipating major shifts in the business environment that make whole strategies obsolete.” Pierre Wack, leader of Shell’s initial Scenario Team, 1971

Exxon’s energy vision assumes the immortality and long-term growth of the classic thermal-based system.

But Exxon’s energy output cannot grow if it only offers more (expensive) thermal fuels to fill fully built-out existing pipelines and energy channels. Too many alternative technologies are now competitive to allow the current energy system to survive peacefully into old age.

That is why Exxon’s rigid backward-looking vision is so dangerous – mainly to itself, and its investors.


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Scale and Scalability: A One-Chart Guide to the Global Energy Transition

An era of unbalanced, unproductive energy supply is coming to an end – and a new age of scalable, efficient energy is rapidly emerging.

In previous posts (eg here and here) we outlined the main features of the current energy transition: the move from the dominance of extracted oil and gas, toward manufactured energy via shale, solar and wind.

In this short piece we try to capture the transition in a single chart.

The main organizing principle is the idea of scale and scalability: energy leadership stems from having both large energy resources (scale) and the ability to provide them efficiently, quickly and flexibly (scalability).

Shale, solar and wind have an abundance of both scale and scalability, which is why they are growing so rapidly, and absorbing most of the globe’s incremental energy demand growth.

At the same time, the incumbent energy industry is split between two extremes: OPEC and Russia have vast scale and production scalability, capable of  adjusting supply to demand. However, their high–cost twin, the international energy industry, has limited scale, and low scalability. Rigid and inflexible it has only one strategy: growth via complex, longer-term investments and projects.

The 21st century energy dynamic will be the story of how the tension between the two-paced incumbent industry, and the high speed new entrants, gets resolved. How the use of energy changes when it’s available at various scales, and how a deeply-entrenched industry attempts to reconfigure itself.

As a start-point, the chart below attempts to put a number of these key issues together in one place, using scale and scalability as a frame. The main sources are highlighted below it, and a summary of the key issues follows.

But for those happy enough with just the picture, the post ends here.

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The Surprising Dual Winners of the Energy Transition – OPEC and the New Technologies: Shale, Solar And Wind


There are a lot of new arrivals at the low-end of the energy cost-curve – but OPEC may yet adapt.


US shale and global solar / wind energy technologies are now competing strongly with the traditional oil and gas industry: these new technologies continue to grow in size and their costs are declining quickly due to scalability and learning effects.

The new players are also dispersed, decentralized and respond to market forces and pricing rather than any coordinated policies

This intense competition will force OPEC and other major national oil companies to rapidly change to compete on price rather than cost-plus market control.

A surprising outcome of this may be that OPEC along with the new energy technologies emerge as the dual winners of the energy transition.

Polar opposites in many respects, these two blocs have similarities in terms of self-organised decision-making, technological scalability and vast reservoirs of energy to rely on.

These are qualities that international energy companies, for all their financial and engineering heft, chronically lack – as likely losers, they will need to quickly develop exit and harvesting strategies.

Although unwelcome news inside the offices of many international oil firms, this is likely a good result for global energy consumers, and potentially a stable political outcome as both winners adjust to the new energy reality.

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The Other Side of The Equation: Oil Growth now Depends on Consumer Choice more than Industry Demand

Car as Device, Gasoline as Consumer Good

Reviewing US gasoline consumption in detail reveals the emergence of a deeper trend for crude oil demand: it’s future growth depends increasingly on its capability as a consumer good, not as an industrial commodity.

In its major markets – the US, EU and China – crude oil’s major growth component, motor gasoline, now has to compete with non-gasoline technologies in its core market, road transportation.

OPEC and other oil producers may still calculate consumer demand for gasoline is a given – but that is no longer a safe assumption. They need to consider how to compete as providers of a consumer product, rather than act as suppliers of an irreplaceable commodity.

Oil demand may soon start to be dominated by choosy individual consumers, rather than more predictable industrial buyers.

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The Sun Will Always Shine, the Wind Will Always Blow

Active Energy Management via Solar And Wind: why intermittency is just a mid-level engineering problem

“Wind and solar PV capacity has grown very rapidly in many countries.. By the end of 2015, these technologies had reached double-digit shares of annual electricity generation in ten countries..in all cases without compromising the reliability of electricity supply. “

IEA, Getting Wind and Sun Onto the Grid, 2017

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