Three Myths About the Oil and Gas Industry’s Future and How To Counter Them

What are the most important trends in energy? If you follow mainstream press accounts, there are at least three:

1. The oil and gas industry will soon face radical restrictions as countries respond to climate change.
2. The rapidly growing electrical vehicle market will make oil obsolete.
3. The world is quickly moving toward 100% renewable energy.

All of these supposed trends are part of an overarching narrative that says we are in the midst of an energy transition: the world is moving quickly and in­evitably away from “dirty” fossil fuels to “green” solar, wind, and batteries.

Regardless of whether the “transition to renewables” narrative is true, the wholesale belief in that narrative poses a threat to oil and gas companies. A recent survey of top fund managers, including BlackRock and HSBC, found that 90% believe international oil and gas companies will be negatively revalued in a few years because of climate and energy transition risks—and many think this negative revaluation has already started.

What’s more, the belief that the industry’s days are numbered will make it increasingly difficult to find and retain top talent—a crucial priority at a time when the industry is already facing the challenge of coping with the “great crew change” brought on by Baby Boomer retirements.

One major way the industry has responded to this is to talk about the benefits of its work: about how oil and gas power our homes, cars, data centers, and hospitals, and about how the industry creates millions of jobs and billions in tax revenue.

All of that is true. But, by itself, it does not counter two core premises:

1. That oil and gas are easily replaceable by solar, wind, and electric vehicles, which means these benefits are not unique to oil and gas but apply to all sources of energy.
2. That oil and gas have catastrophic costs—on our health, our environment, and our climate—which means that even significant economic costs of transitioning to alternatives could be worth it.

When I give training workshops to the oil and gas industry on persuasive communication, one of the key concepts I teach is what I call superiorizing. You can’t just talk about the benefits of your product: you have to explain how your product has a superior cost/benefit combination to the alternatives.

Imagine that you sold smartphones and your pitch was, “Our phone is amazing. It makes calls, it holds your music, you can surf the internet.” Well, so does every other phone on the market. Customers won’t buy your phone unless they believe it is superior to the alternatives. That is why Apple doesn’t just talk about the iPhone’s features, but about how they compare to a Samsung or a Google Pixel.

The key to countering the negative narrative is to explain why fossil fuels are unmatched in their ability to provide the world with abundant energy—and why this benefit overwhelms their manageable risks. That is the case I make in my book The Moral Case for Fossil Fuels. Given the superiority of fossil fuels and the desire of people around the world to flourish, we should expect that the fossil fuel industry won’t transition to non-existence, but expand as it supplies the world with energy abundance.

To counter doomsday predictions about the future of oil and gas, the industry needs to replace the “transition” narrative with the “expansion” narrative by making the superiority of its product part of every energy discussion. For example:

• Will we impose radical restrictions on fossil fuels, such as a carbon tax high enough to stop people from using oil and gas? Unlikely. Given fossil fuels’ enormous superiority, the tax would have to be far higher than those passed already—and which have already led to opposition in places such as France, Australia, and Canada.
• Will electric vehicles make oil obsolete? Unlikely. Given oil’s superiority as a source of portable power, even the 2% market share that electric vehicles currently have depends on massive subsidies and mandates. And the majority of oil is not used for personal vehicles, but for even harder-to-replace uses such as shipping and air travel.
• Is the world going 100% renewable? Unlikely. Wind and solar are currently inferior, intermittent sources of electricity and cannot supply reliable power—not without backup from reliable forms of energy such as fossil fuels or cost-prohibitive storage.

If the industry wants to counter a negative narrative, then it needs to start by educating its workforce and all of its stakeholders about the superiority of its product.

Alex Epstein is author of the book The Moral Case for Fossil Fuels and the founder of the Center for Industrial Progress. He conducts training workshops, is a consultant, and is a frequent speaker on the topic of human flourishing through industrial progress. He has delivered presentations to many large energy companies, including ExxonMobil, Chevron, Phillips 66, Valero, Enbridge, and TransCanada. For more information, go to ­industrialprogress.com.