Persist and thrive

The fortunes of oil and gas companies are inextricably linked to the health of the global economy: economic growth drives oil and gas demand. Just as during the recessions of the 1980s and '90s, the present financial crisis has left many facing serious challenges in this key sector of the energy industry. The question is, did we learn anything from those earlier downturns, and, in any case, will the lessons picked up then help us this time around?

Karl Rose, Chief Strategist, Shell International BV, believes we need to be very careful about rigidly applying behaviours that might have worked in the past to the current situation. He points out that companies have tended to react to downturns in the same way as bears respond to winter: by going to sleep.

This works for bears (and sometimes for companies) because they assume that the crisis will be short-lived, they stockpile sufficient reserves and they are reasonably certain that they will not miss out on any opportunities during hibernation. Significantly, the success of the bears' strategy also relies on the downturn being followed by a return to the status quo. It is this last point that particularly causes Rose to question the validity of companies adopting this largely defensive strategy in the current situation.

"There are indications that this economic downturn is different from any of the others," says Rose. "Greater volatility in the markets and higher levels of consumer debt point to a slower return to any sort of normality and a more uncertain future. Behaving like bears is not going to be the answer; I believe the situation calls for a more positive response."

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