Changing Dynamics in the Oil and Gas Industry; A Call for Public Awareness and Understanding
Authors: Jentsch W.A. 
Published: December 2007

This paper aims to provide a catalyst to engage the SPE/Industry to take a lead in increasing public knowledge on the dynamics of our rapidly changing petroleum business. The oil and gas industry and the public must live in harmony and work together for mutual benefit. Otherwise, distrust will worsen and increased regulation, rising finding cost, higher product cost and "energy crisis" situations will most certainly ensue. Their effects upon our quality of life will be profound.

Historically, the oil and gas industry has done a lackluster job of educating the public of the far-reaching benefits of exploration, production and refining. Concurrently, the industry has demonstrated insensitivity to public causes and concerns. Consequently, the industry has developed a poor public image that worsens with each year. Much of the outside world views our industry as "Big Oil," with a negative perception of easy wealth, excess power and bad pollution.

In the past 30 years, the industry has undergone increasingly dynamic changes after many years of a stable environment. World demand has increased 27% from 59 mmbpd in 1973 to 78 mmbpd in 2003 (roughly two Prudhoe Bay Fields), and the global community has grown dependent on cheap energy. During the same period, world population1 (Fig. 1) has increased by 61.9% from 3.9 billion to 6.4 billion. World supply of crude has also experienced many changes, including new discovery sources and sizes, changing reserve/production (R/P) ratios, changing elasticities of supply and demand and now, the very real possibility of not being able to meet an ever-challenging and increasing global crude oil demand.

If the predictions of Dr. Kenneth Deffeyes2 and others prove to be true, the global economy will face some major challenges in the near future. In the industry, the differences between market-driven dynamics and scientifically driven dynamics should be understood. The general public and some within our own industry do not understand these dynamics. Most are unaware that current US crude oil production is below that of 1945 (Fig. 2). They do not know that even with a large price increase in the late 70's and early 80's, the overall decline trend of US crude oil production did not change significantly and they do not understand that the US currently cannot produce oil at levels of the early 1970's.

Cheap oil and contradictory policies have led the public to become hooked on cheap and plentiful fuel. The demand has risen steadily since the '40's. Now, the time has come for the industry to acknowledge that in the foreseeable future, crude may no longer be the nation's main source of energy. If forecasts are accurate, we will see major shifts in our lifetimes. Educating the public will provide a partner to develop solutions, rather than prolonging misunderstandings and adversarial posturing.

This paper reviews the changing dynamics of the oil and gas industry with a focus on crude oil. Dynamics having the greatest potential of affecting the general public, the overall global economy and the greatest overall need for understanding will be highlighted, discussed and related to their potential public impact. The benefits and difficulties with educating the public will be addressed.

A partnership strategy should be pursued to educate the public on the industry's changing dynamics and its effects on the general public. This could be done through a joint partnership with API or other industry-related groups. Whatever the vehicle, the industry must begin to honestly inform the public to these changing dynamics and their potential impact to all.