It’s been said that it’s impossible to go through the day without a rationalism or two … or three. In PR, the same can be said for the euphemism. Without them, companies might be forced to speak more directly about some rather uncomfortable situations. Layoffs? No, rightsizing. Or, “the opportunity to start your new job search immediately.” Seriously.
The thought occurred as I read through a few stories covering Shell’s recent disappointing quarterly earnings announcement. The company largely blamed the earnings miss on poor performance in their US oil shale holdings. In short, the drilling wasn’t turning out the expected amount of crude. In fact, the prospects for production from shale are so poor that the company is backtracking on previous predictions of prodigious output to come in those same shale plays. But that’s not how they put it.
In a master use of euphemism that will surely be noticed by others in corporate communications, the previously stated production target of 4 million barrels per day was “retired.” They didn’t give up on the goal. They didn’t say they made a mistake in calculating the original target. Nope, they simply “retired” it.
In fact, given the underlying cost structure issues apparently beginning to play out in the shale oil sector, it might behoove the other oil majors who have invested in these fields to keep the thesaurus handy.
Once upon a time, the United States of America was the world’s largest oil exporter. We grew rich from the oil we sold and the oil we used powered new industries and ways of living that, in turn, amped up our use of oil until we had nothing to spare. Simultaneously, natural events ran their course and oil fields became less productive, causing domestic production to peak in the early 1970s.
That about sums up the Export Land Model, a conundrum I touched upon in a previous post. Now, it seems to be playing out, with its own localized twists in the home of the current number one oil exporter, Saudi Arabia.
Earlier this month, a report by analysts at Citigroup echoed that assessment, saying that the world’s biggest oil exporter may become “an importer” by 2030 due to rising domestic use – which the Citgroup analysis estimated was growing by about eight percent per year.
Even more recently, a Reuters story notes that Saudi Arabia burned record monthly volumes of oil in June and July. The story notes that the reason for the increase is a need to produce more electricity for air conditioning. Unlike the United States and most other Western countries, Saudi Arabia uses oil to produce a large percentage of its electricity. Switching to solar would seem to be a no-brainer – they have a surplus of sun and the rise in oil prices is keeping the cash pipeline flowing. The trick is in the transition.
This Wall Street Journal article has some good numbers and perspective on the challenges the Saudis (and other OPEC countries) face in trying to transition up to a third of their electricity generation to alternatives by 2032.
Meanwhile, a story from this week quotes the Saudis as saying that they will be turning increasingly to natural gas for electricity generation to reduce their dependence on oil.
Ditching one fossil fuel for another to generate electricity? That sounds really familiar – where have I heard that idea before?
PR has its limits. You can only create so much belief in the face of a persistent, contradictory reality.
As the shale frenzy has bubbled along, stories about a United States and/or North American resurgence in oil production have been pushed in major media outlets from the Wall Street Journal to the New York Times and all manner of blogs in between. At the same time, domestic prices at the pump remain stubbornly aloft.
Since economic “law” dictates that ample supply should result in lower prices rather than the upward trend we’re experiencing, there must be other factors at play, right? Anxiety over threats of war with Iran, commodity speculators, Big Government rules that hamstring drilling and the insatiable greed of Big Oil are all trotted out as the proximate cause of this seeming paradox. But for these transient, man-made issues, the storyline goes, we’d be swiftly on our way to Newt Gingrinch’s $2.50-or-less-a-gallon Promised Land. We are, after all, sitting on trillions of barrels of technically recoverable oil and 100 years of natural gas, right?
Those seeking the true contours of the energy landscape we’re traversing would do well to remember that good answers start with good questions. So, take a look around and ask yourself a few. If we are actually awash in oil:
- Why are major airlines conducting flight tests of planes with biofuels?
The actions by the organizations cited above are not inconsequential. They represent major commitments of money and effort, and, in the case of the auto companies, a major directional shift for their businesses. If energy independence and a gushing supply of oil were just a few more horizontally drilled and fracked wells away, would these entities really be pursuing strategies that hedged their futures increasingly away from reliance on petroleum?
So, who are you going to believe; the hyped assurances of investment banks and oil companies, or your own lying eyes?