The low oil price is having a significant impact throughout the world. In this speech, Maarten Wetselaar argues that oil and gas companies and governments must look at the implications of the oil price on their balance sheets and economies in the short term, while also keeping an eye firmly fixed on the long term. This will help them survive the current price environment and come out stronger on the other side.
Ladies and gentlemen, good morning.
The impact of the low oil price continues to be significant and far-reaching. Over the past year, we’ve witnessed a large transfer of wealth from producing to consuming countries.
Producing countries are feeling the pain, as low prices impact state finances. And countries which consume oil are feeling the gain, thanks to an increase in spending by consumers who are saving money at the petrol pumps. The oil and gas industry has also been affected.
Over the next few minutes, I’ll give my take on steps oil and gas companies and governments should take with the oil price sitting where it is.
But first some context. As we know from experience, the oil and gas industry is cyclical in nature.
This means it’s not good enough for oil and gas companies and governments to be solely fixated on today’s oil price.
Just as the politicians in the room have a responsibility for the long-term wellbeing of their constituents, companies have a long-term duty to their shareholders and their customers.
Whenever I reflect on the importance of a balanced approach during cycles, I’m reminded of Friedrich Nietzsche’s phrase: “That which does not kill us makes us stronger.”
By dealing with the short-term while not losing sight of the long term, companies and governments will survive the low price. And they’ll come out stronger on the other side.
In the short-term, governments need to react decisively to the impact of the low price on their respective economies.
But as you all know, governments mustn’t only concentrate on what’s going on today. They also need to focus on the future.
Multiple energy sources – from oil to gas to renewables – will be needed to address long-term energy-related priorities. Governments must look closely at what sources of energy best match their needs.
Here in Europe, for example, energy security, economic competitiveness and emissions reductions are key priorities. These priorities aren’t mutually exclusive. Governments don’t have to favour one over the other.
Natural gas is a solution to all of these challenges.
Europe sits within easy reach of many natural gas suppliers, including the largest source of low cost natural gas in the world in Russia.
It can benefit from significant new supplies of liquefied natural gas, which can be shipped at short notice, then turned back to gas and piped to homes, businesses and industries.