Deloitte report: Managing 'geopolitical risk-oil price paradigm' will become a driver of success for oil & gas companies
New York, 26 April 2011 — A new report from Deloitte Touche Tohmatsu Limited (DTTL), Emergence of the new geopolitical risk-oil price paradigm, suggests that intangibles such as geopolitical risk and economic uncertainty are likely to play an increasingly important role in determining oil prices and therefore will need to be managed effectively by oil and gas companies.
“Oil companies are being challenged in ways that weren’t readily apparent even a few years ago,” says Adi Karev, DTTL Global Oil & Gas Leader. “In this volatile environment, managing geopolitical risk will emerge as one of the key competitive advantages for oil and gas companies.”
According to the report, there are a number of disruptive forces impacting oil prices, including:
According to Karev, the ability of the international community to deal with these risks is not as robust as it used to be. “Historically, the world was able to solve many of these crises based on a containment structure that is beginning to erode due to the emergence of a multipolar world order,” he says. “In this uncertain world, the challenges facing oil & gas companies are fast multiplying. One potential strategy for oil & gas companies that want address these risks is the Strategic Flexibility framework, which is an advanced form of scenario planning that helps companies cope with the uncertainty about the future marketplace. This four-stage strategy process allows a company to go forward with those aspects of its strategy that are likely to pay off under any scenario, while holding a portfolio of options on initiatives that become useful if specific developments occur in the international arena.”
To view the report, please visit www.deloitte.com/oilandgas.
Note: As used in this document, “Deloitte” means Deloitte Touche Tohmatsu Limited member firms.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's approximately 170,000 professionals are committed to becoming the standard of excellence.