Within a few days after the attacks of 9/11/01, a small group of my colleagues in Texaco's long-range strategy group gathered to consider their implications. It wasn't an official project, as the company was within a few weeks of being absorbed into the larger ChevronTexaco, and correspondingly focused on merger issues. I'm not sure whether our results ever found their way to the new company's management, as our earlier, higher-profile scenario work had. But over the ensuing years, I've been repeatedly reminded of the insights that emerged from our effort. I attribute them more to the genius of the scenario process than to any brilliance on our part. Even when done with little preparation, minimal external inputs and a team preoccupied by enormous personal uncertainties, scenarios can provide remarkable glimpses of the future.
Although very much concerned with the ultimate implications for the energy industry and our company, Texaco's approach to scenarios invariably began with a rigorous look at the larger world in which we operated, consistent with the methodology that the scenario gurus at the Global Business Network instilled in us. In the case of 9/11, we identified two primary uncertainties that have proved quite durable: the means chosen to defend the Western world, and the choices of Islam's majority. As early as September 2001, it was clear that the future would largely be shaped by the perceived legitimacy of the ways in which the US and our allies responded to the attacks.
The implications for energy were less clear. Many of our guesses haven't panned out, but we believed that the events set in motion by 9/11 would greatly complicate the industry's access to resources, and that view has been vindicated by the disruptions and risks that have driven oil prices to heights that were unimaginable only a few years ago. Recall that on September 10, 2001, West Texas Intermediate crude oil traded for $27.63 on the New York Mercantile Exchange, a level that seemed medium-high at the time.
Where do we go from here? Well, if al Qaeda makes good on its latest threats against the Persian Gulf and Israel, the recent drop in oil prices could prove a very short respite. Such threats have been made before, though, and attacks in Saudi Arabia itself failed to inflict the damage their authors intended. Our supply lines may prove more resilient than even we think, but let's hope this isn't tested soon.
There have been numerous editorials and op-eds in the last week concerning whether 9/11 truly "changed everything." I know that it changed me. My wife had phoned to alert me about the first impact, so I was watching TV and saw United 175 hit the South Tower in real time. Without thinking I told a colleague, "This is war," and so it was and still is. On that beautifully clear September morning, everyone in my office 15 miles away in White Plains could watch the smoke rising above lower Manhattan, as we waited for the next blow to fall. I doubt we all agree today about the path we have followed for the last five years, but none of us will forget that day.
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