An article in the April Financial Times Energy Review by Robert Mabro, director of the Oxford Institute for Energy Studies undermined the recent popular rationalization of the low oil price. Mabro's argument is that oil price commentators (and I would add - those CEO's and consultants running the show) misinterpret the falling oil price as a structural change.

Conventional wisdom would have it that the appropriate reactions to these structural changes are mega-mergers, downsizing, and the like. The most amusing argument along these lines is a reductio ad absurdam type of reasoning which says that we should re-tool our industry to be able to exist with an oil price of, you've guessed it, zero. The new wisdom involves a business plan that has at its core, the action of giving away the oil free! A nearly credible scheme involves giving away the oil in the ground and "charging rent". But some of the zero oil price reasoning, while coming from impeccable sources, is rather hard to take seriously. In recent conferences I have heard this game plan being advocated by speakers from major oil companies and their consultants. One notable "knowledge worker" offered an interesting example of the post-zero oil price oil co.

If oil is worthless, what do you sell in a gas station? Well that's an easy one, coffee and cookies of course. You think I'm kidding? A gas-less gas station has recently opened its doors in London's Strand. I have yet to visit this new wonder and I am intrigued to see if it represents the ultimate downsizing of the extremely grand buildings of the parent company or whether the whole thing is just an April fool!

But to get back to Mabro, the alternative to structural trend leading inexorably to zero-cost oil is that we are not living through a trend at all, but just another cycle. Which is pretty much what 99% of the actual oil industry knew all along. It just took one academic to say that the unholy alliance of CEOs and consultants was talking nonsense!

Of course can say this with some smugness now that Brent is inching its way back up towards $16. But smugness is not really the order of the day. We have had the mergers, the service side is hurting as the oil co. knee has jerked yet again. And in some respects this is the natural order of things, when the price is down, retrenchment is inevitable. But do we really need the accompanying baloney? Anyhow, in this context, what is likely to be the real winning tactic in the long term? Retrenchment, or seeking out the bargain basement opportunities that emerge?

My personal belief is that much of the trends and zero oil price talk is aimed at sweetening the bitter pill of letting people go rather than reflecting corporate intent. But it is pernicious talk and can have serious effects on the health of the corporation. In the study that The Data Room performed for Total SA on Upstream Information Management (see this month's back page) a pattern emerged of a tendency to throw the baby out with the bath water during restructuring. The library function, while not a spectacular activity within the oil co., has been the unfortunate victim of successive waves of downsizing in some companies.

Unfortunately, as readers of PDM will appreciate, there are still many tasks which have yet to be successfully computerized, and that strange mixture of fastidiousness and intelligence which is the hallmark of the good librarian is almost the antithesis of Information Technology. Companies have suffered from restructuring, and lost corporate knowledge as a result. This is itself is not new, the K-Management gurus are telling us this all the time, but what is less palatable is that the management consulting business at large is purveying downsizing as a panacea, and then coming along with K-Management as a solution to deal with the ensuing havoc.

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