Shell, Exxon Mobil, Total, Chevron, BP… we all know them as oil companies primarily and since the 1950s these have been the major players on the market in much of the western world. Their core businesses rely on petroleum production and crude oil exploration, but a shift in how we produce and consume energy is taking place. Gas and gas products are taking over as a staple energy commodity for many industries because of many of the carbon and greenhouse gas benefits associated with the fuel when compared to petroleum products.
Renewable energy is also eating away at the market share of oil. Many economies are transitioning to a greener energy landscape forming a direct threat to businesses reliant on fossil fuel production. If oil companies are to not go the way of many coal mines and be forced out of business due to declining demand for their products, they must diversify.
Technology that is already being deployed in the oil sector does carry over in many respects to gas production. Knowledge and resources can be devoted and re-allocated away from oil to other, low-carbon technologies. However, there is a significant risk of under-investment leading to supply shortages in the short-term.
With a crowded market and an uneven playing field, big oil’s transition to big energy will come at a cost, something many investors and shareholders are hesitant to latch on to. Gas also has its days numbered as renewables technologies increasingly develop and become mainstream. The pinch will be felt by all in the next decade with increasing risk of supply shortages and under-investment in key pre-transition industries.
