By Gonzalo Toca
Martin Thomsen –a Brazilian with an Argentine mother and a German father and a Spanish wife and children– knows that his leather suitcases are…a second skin. Now, more than 15 years after earning his Executive MBA at IE, he lives in Istanbul and is Director General of BP in Turkey.
Why has the price of petroleum dropped more than 60% in the last two years?
Prices have collapsed because demand has also declined among the great world powers, such as China, while production levels were maintained or even increased. There was and there still is too much petroleum on the market, and this has empowered the OPEP countries, which want to maintain or increase their commercial quota. We’re facing a big price war that’s good for the economy but bad for the planet.
Good for the economy and bad for the planet?
Good for the economy because there is a transfer of income from the energy sector to industry, which benefits the companies, tourism and homes: energy for the consumer is cheaper. And bad for the planet for two reasons. First, the oil-producing regions and countries are watching as investments, employment and economic activity –both inside and outside the energy sector– suffer and generate less wealth. And second, renewable energies are no longer competitive when oil is at 50 dollars a barrel, and as a result are discouraged.
Just before 2014, a barrel had increased 40% in price, and now it has surprisingly dropped 60%. Very few companies could have survived that. How have the petroleum companies managed to do it?
According to The Economist, 30% of the shale gas and shale oil companies in the United States have closed, another 35% have temporarily suspended their production and the ones remaining in operation are in the process of restructuring. Even the big companies like ours, which are not heavily indebted, have had to reduce investments and maintain dividends with important cost-reducing measures.
Executive leadership and flexibility are vital in keeping a company afloat…
Without any doubt. We need resilience and determination. We have to resist adversity as professionals and as people, recognizing as soon as possible that the surroundings have changed, and then, in the most objective way possible, we must set a new course that will make companies competitive and sustainable. Without that determination, and proper implementation, any strategic plan isn’t worth the paper it’s written on. The economic and competitive future of companies now depends on the quality of their managers, who have to understand the business climate, predict it and act accordingly.
And all this in the middle of great volatility.
This crisis thwarts the sector. We must make important decisions about the business model: how to make more money, be competitive in costs and more flexible, and carry out some very specific projects. All this, in increasingly changeable surroundings, has exposed this sector, along with other sectors, to crises that are more and more common and intense.