Scenarios for energy: Sustainable world vs global mercantilism

Abstract

Long-term forecasting is not a very successful enterprise. Some of the most important events of the last 2 years, particularly the political upheavals in Eastern Europe and the Soviet Union, and the Iraqi invasion of Kuwait, caught most observers off guard—even knowledgeable ones. In the oil industry, experts have sometimes been able to suggest, but rarely to predict, the key turning points in crude oil prices. Time after time, events that are considered improbable or even implausible occur. The future is too important to be ignored, notwithstanding this difficulty. The Shell approach to strategic planning is, instead of forecasts, to use scenarios, a set of ‘stories’ about alternative possible futures. These stories promote a discussion of possibilities other than the ‘most likely’ one and encourage the consideration of ‘what if’ questions. Although scenarios deal with the future, they are essentially a way of structuring the overwhelming, confusing information we have about the present. One of the important uses for this structure is to help us recognize more of what is going on around us, including the early, weak signals of change. Good scenarios are challenging, plausible and internally consistent. They also illuminate the uncertainties and issues that are critical for the future (in the case of this paper, for the future of the energy industry to the year 2010). Scenarios lead to better decisions if they improve our understanding of the world. This paper outlines two scenarios prepared in the Group Planning Coordination of Shell International Petroleum Company. Two notes are important. First, the author has summarized a much larger body of work to which approximately twenty members of Group Planning contributed, under the leadership of Kees van der Heijden. Second, this work was completed in the summer of 1989 and so, naturally, were we to re-formulate the scenarios now, our assessments in many areas would be very different. The value of this paper is therefore less in the content of the scenarios than in the particular approach to thinking about the future.