Tisha’s Insights

What to Watch for 2022: Energy Prices

December 30, 2021 Tisha Schuller

The recent price volatility around oil and gas has spurred myriad interpretations — most of which are interesting for how they demonstrate our selective reasoning, usually defined by our politics. Further, the line of reasoning most industry executives are likely to pursue is in fact the one most likely to undermine their leadership position. Instead, the opportunities created by price volatility are more compelling — and it’s these opportunities that game-changing leaders are scouting closely.

Both of these things are true:

  • Price volatility around the world complicates the politics of the energy transition. Does the volatility build support for or opposition against a green energy movement?
  • Public pressure to address climate concern marches on — ignorant of the debates about its political viability.

The situation

Like our recent What to Watch on COP26, your takeaways from recent energy price spikes and overall price volatility largely depend on your bias. In order to widen the aperture on our own interpretation, it’s important to follow all the main interpretations, not just our favored one:

1. Interpretation #1: Building anti-green sentiment will jeopardize the energy transition. Nothing freezes the beating heart of a politician with fear like rising energy prices. Addressing those prices — be they for U.S. gasoline or European heating — is mission critical for the political class. We see a flurry of political reactions to the spikes, from accusing companies of price fixing to the Strategic Petroleum Reserve release to ironic calls for producers to ramp up output. A possible — even likely — reaction to rising prices is a popular movement against the energy transition. In the absence of an orderly and affordable transition, we are certain people will march in the streets.

The strongest purveyors of this theme are not politicians or activists concerned about the viability of the energy transition; they are energy industry supporters. While industry concerns for a pragmatic transition are both valid and viable, headlines such as Oil CEOs Warn That High Prices Jeopardize Energy Transition do not ring true. Industry supporters pursuing this line of argument sound to the average stakeholder like entrenched monopolists protecting their turf. Further, to most stakeholders they appear to be the same people causing high prices and then blaming these prices for undermining the transition. Such industry proponents risk undermining the progress the industry has made through publicly sharing our ambitions for a decarbonizing energy future.

2. Interpretation #2: Rising oil and natural gas prices require accelerating the transition. The exact same data that leads one group to argue in favor of rejecting the energy transition is inspiring another group to double-down on the transition strategy. Proponents argue that price volatility is precisely why society needs to move off reliance on fossil fuels. When paired with the urgent climate narrative and inattention to the importance of energy availability and reliability, this argument presents an irresistible siren song to climate hawks, who are now a dominant class.

In a clever move, the Biden Administration has engaged in an ad buy that touts the Build Back Better Act as a program to lower energy prices. This flip of the high-energy-prices-spell-political-risk script provides fodder for the acceleration narrative.

Interpretation #3: We need a careful or “orderly” energy transition. Duh: Energy systems are extraordinarily complex and disciplined thinkers are using price volatility as an opportunity to warn policymakers about the explicit need to plan carefully. While the most compelling, interesting, and relevant line of thinking around rising energy prices, Interpretation #3 also largely reserved for the inside baseball energy wonks. And herein lies the opportunity for you, the gamechanger.

Seize the day

We are all tempted to look at energy price volatility and respond (1) “See I told you, not gonna happen!” and (2) Let’s educate them!” Giving into that temptation is easy — too easy.

Game-changing leaders don’t limit their options for analysis to only those that reinforce their chosen narrative. Instead, these leaders seize the opportunity to both lead and call attention to the challenges inherent in such a dramatic transition. They recognize that the “orderly” energy transition conversation has its proper place. Here’s how we can proceed:

  • Understand and track all these lines of interpretation. Follow the news that you don’t want to hear to understand how these conversations are playing out. The fact that some aren’t credible doesn’t make them any less powerful to those who believe them.
  • Lead in building the orderly transition. The first step for credibility in leading in the evolution of our energy system is to share ambitions for a decarbonizing energy future. Then, take credible steps toward building that energy evolution.
  • Save the nuance for when you’re sure the conversation is based in trust. Once company leaders have established trust and demonstrated concrete leadership actions, then the opportunity emerges to address the challenges of the transition. We want to be at the table for the difficult conversations about how the energy transition will require patience, investment, innovation, and collaboration. But we must earn our seat at that table through leadership, vision, and action.

Speaking of leadership, vision, and action … Both True readers know that I’m obsessed with empowering and retaining our oil and gas millennial workforce. That’s why I’m urging you to sponsor, send employees, and spread the word about the YPP (Young Pipeline Professionals) USA Symposium April 7 in Houston. Knock Task One off that New Year’s resolution list: Supercharge our millennial workforce!

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Cheers to your leadership!



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Both of These Things Are True

By Tisha Schuller