These three trends interweave and, depending on the extent one bears on the other, they provide the methodological basis for developing alternative futures. For example, a world in which the forces of globalization and liberalization predominate over the compulsions of nationalism would see the further lowering of trade barriers; a more rapid transfer of technology across national frontiers and rapid economic growth on the back of the comparative advantage of countries. Oil prices would in such a world exhibit short-term volatility but in view of the (definitional) willingness of the international community to strike ‘win-win’ deals, these prices would range within a broad band agreed mutually between the producer and consumer nations.

In contrast a world in which markets are abridged and regulatory nationalism and ascriptive identity predominate would not be conducive for international energy cooperation. Here the producer countries would most likely want to maximize their short-term revenues by constraining production and restricting fresh investments. And consumer countries would seek energy security by trading ‘security of demand’ (ie long term purchase agreements) for ‘security of supply’ (i.e. overseas acquisition at any price). Prices would be volatile but susceptible to sharper and extreme movements.

Scenario planning is now a widely used planning tool amongst the international players. I would recommend that it be adopted by our oil companies. We need to sophisticate our planning process. And if nothing else better prepare ourselves to understand and respond to the mood shifts of the paper trader. Scenarios would facilitate such understanding.

... contd.