"Scramble" or "Blueprints:" World Demand for Oil to Exceed Supply in Next 7 Years

The TimesOnline website reports that Jeroen van der Veer, the Chief Executive of Royal Dutch Shell, said in an internal email this week that demand for oil and gas would outstrip supply by 2015. In this email, Mr. van der Veer outlines two possible scenarios under which the world responds: "Scramble" or "Blueprints."

What is interesting is the idea that an oil company executive would be so upfront with a prediction of dwindling resources within the next 7 years - a much shorter time frame than what most have suggested. However, with the Chinese and Indian economies undergoing revolutionary growth, the demand for oil has increased. Mr. van der Veer suggests that regardless of the world direction for renewable energy sources, the demand for energy will force the investment the unconventional in the form of oil sands and in nuclear energy.

The scramble option is one in which world governments scatter their investments and resources in a sort of search for a re-invented wheel. There is no larger, grand scheme under which policy is developed or investment coordinated to make the shortest possible turn around time. The blueprint option would require cooperation and collaboration amongst governments and policymakers, where resources are more frugally managed.

The huge problem in outlining these scenarios is that of self-interest. Governments go to war for access to energy resources. The blueprints option suggests a consensus of international actors which would necessarily require these actors to make agreements that may on the surface seem not within their considered self interest. Governments are political actors: on the one hand these agreements would require those with resources be open to sharing their energy power, and those without those resources would have to be open to the idea that their economic future is not necessarily theirs to control.

While it is interesting that an an oil company would be asserting their principal product is becoming more scarce than anyone has heretofore publicly suggested, it is not an entirely radical approach. It is, in a sense, what organizations do - protect themselves from uncertainty. Mr. van der Veer is taking a proactive approach toward a strategic vision for the company moving beyond the next 7-years; Calling on governments to take on a direction so the company can respond. And survive.

Governments, however, rarely behave proactively and when they do respond to situations, the short term advantage is generally taken over the long term gain.

Mr. van der Veer sent the email to the company from Davos, Switzerland where he is in attendance at the World Economic Forum. The 38th forum opened this past Wednesday with some 2500 attendees including 27 heads of state, 113 ministers, and several hundred corporate leaders, including Mr. van der Veer. Among the world events in discussion has been the US Federal Reserve rate cuts, the possibility of global recession, and the swings in the US stock markets.

REFERENCES

• http://www.channelnewsasia.com/stories/afp_world_business/view/324421/1/.html
• http://www.abcnews.go.com/Business/IndustryInfo/story?id=4183875&page=1
• http://marketplace.publicradio.org/display/web/2008/01/25/out_of_oil_within_seven_years/
• http://business.timesonline.co.uk/tol/business/economics/wef/article3248484.ece