Oil industry faces strategic change in operations to survive new climate of uncertainty

Since the end of the 'boom' days of the late 1970s, petroleum companies have wrestled with productivity and competitive position. But following the global oil price collapse of 1998, the stakes have never been higher. A whole new productivity race for survival has begun in which being 'informationalized' may be the key. Well-known thinker on oil industry issues, Robert Peebler, president and CEO of Landmark Graphics Corporation, explains in this edited version of a recent position paper. More and more, industry executives realize they may have to live with uncertain prices almost indefinitely. No one can predict the price of oil next week, next month or next year. Even if prices go up, no one can depend on them staying there. In today's environment, therefore, the key to survival is to focus on productivity at any oil price. In Only the Paranoid Survive, retired Intel CEO Andy Groves describes a business phenomenon that he calls 'a 10x force.' The idea is simple: at various times, most businesses encounter a force large enough to fundamentally alter the nature of the business from that point forward. Often it is an external force, such as new technology. The Internet is a good example. The current 'oil bubble' is another example of a 10x force. In 1998, the industry had approximately three million barrels per day of excess oil capacity worldwide. Some observers believe the bubble could pop by the end of 1999. Others predict it will last for two or three more years. The fact is: no one knows for sure. And that uncertainty represents a significant psychological shift from the past.