Wednesday, 10 September 2014

Can We All Have Jobs at the FT?

There's a chap called Nick Butler at the FT who writes a weekly energy blog.  I presume he draws a salary.  Now we all know how tough it is to write one blog post a week - sheesh, sometimes I can hardly manage two !

Anyhow, he's noticed the oil price is falling, just like we have.  So what does he write ?  Back To Basics For The Energy Sector, that's what.   He reckons that oil companies will be in a spot of bother, Sherlock, and this is his sage advice, his hard-hitting 4-point plan (I am not making this up.)
  1. Cut Costs:  "goodbye to the corporate jets, the lavish expenses and the padded leather of town centre offices
  2. Cut assumptions about future price rises (sic): consider a $80 scenario
  3. Drop projects that don't fly at $80
  4. More R&D on cost-cutting technology
Cut costs, oh wow !  $80 - how radical is that ?  - the insight, the wisdom, the sheer creativity and innovation of it !  Oil company CEOs everywhere will be ordering extra copies of the FT so that every manager can have her own !

The R&D one made me laugh out loud.  There cannot be an industry on the planet that puts more effort and money into radical cost-cutting technologies.  Single-lift platforms; horizontal drilling; unmanned facilities; the list goes on.  This is the industry that survived $10 as recently as 1998.  

The only oil companies that can't see life at anything less than $120 are the smallest, most desperate exploration-only shops, who will simply have to relinquish their acreage to someone bigger.  And life will go on.

Meanwhile, I understand the newspaper business isn't so profitable these days: and if the FT wants any cost-cutting suggestions ...

ND

18 comments:

Anonymous said...

Is the oil price effecting the Scots vote, do you know?

Have any NO campaigners been pointing to the business news and saying those numbers you have been using are no good.

MyOilyName said...

The one thing falling oil prices will do is make Putin a whole lot more dangerous than he already is.

So thats nice.

andrew said...

WRT oil prices at $80 I think it would be interesting to have an article on

-dees shale oil etc becomes uneconomic.
-does russia becomes uneconomic.
-does windpower etc becomes uneconomic even with subsidies
-how the loss of income and the court judgement kicks BP in hte head even more
-it becomes clear electric cars are like carbon fibre bikes - really cool but not real world
-what the effect is on Iran's income

Just in case Nick Butler is reading.

Off topic, I read Major's piece in the times and it underlined that I was completely wrong about him at the time (the 90s) - possibly one of the better PMs and clear sighted person.




BE said...

Why on Earth would you want a job at the FT? Have some self-respect ND!

I can recommend a good business blog, if any FT readers want to save the cover price... and you can get into some great discussions with some very intelligent people in the comments threads :-D

Nick Drew said...

there may be more LUNCH as an FT-wallah, BE

anon - as far as I know, Facts are notable by their absence in that forum (though I expect some wild numbers fly around)

Andrew - nice agenda there: and you may be right about JM, (everything's relative)

Suffragent said...

"There cannot be an industry on the planet that puts more effort and money into radical cost-cutting technologies"
I worked as a design engineer in the oil and gas industry. Ha, haha, hahahahaaha................

Mark Wadsworth said...

The oil price has been surprisingly stable for ages.

Because supply and demand are both price insensitive, it used to fluctuate wildly from year to year, jumps from $10 to $50 and back to $10 was not unusual.

Is somebody rigging it, or are demand and supply somehow more price sensitive?

That's a serious question by the way.

Andrew says: I was completely wrong about Major at the time (the 90s) - possibly one of the better PMs and clear sighted person.

Politics aside, I always liked him as a personality, and with the benefit of Blair-Brown-Cameron hindsight and comparing him with the dross that went before (Thatcher-Callaghan-Wilson-Heath) he is clearly the best PM in living memory.

andrew said...

@MarkW

My memory starts with thatcher, so completely agree.

@ND

I can say the food in the parent company's head office canteen aint what it was, quality slightly down (but still v good for a canteen), portion size down, costs up, puddings not what they were - possibly connected?

Nick Drew said...

Andrew - Butler has presumably already been consulting for your management with his brilliant business advice ? I was thinking of being taken out to lunch if I had his job, though: I know all about how business journalists live their lives

(lunch here at the C@W canteen is OK, but regrettably it rarely causes me to fall asleep in the afternoon)

Mark - because of the sheer amount of oil available with production cost in single figures (Iraq is most usually cited) there is indeed a school of thought that the price is fixed. Youll even read that it is now being deliberately lowered to punish Putin

I incline to CU's view: fundamentals are at work here, and conspiracy theories are just too easy

(but swings from 50 to 10 and back again weren't as frequent as all that: the big moves are 1973-4, 1979, 1985-6, 1998 and of course 2008)

Suffragent - I'm sure you can point to waste wherever you go but once again, everything's relative. You should try working in a utility, where you'd find some truly missed opportunities for cost reduction

I'd give you the motor industry as another where massive efforts are made towards engineered cost-cutting: and I stick by my original statement about oil & gas: look again at the (very selective) list of tech break-throughs I gave. In the mid / late '80s we saw (a) the prices of oil & gas collapse and (b) Piper Alpha. It looked as though the consequent Cullen Report safety requirements would force upstream costs up so high, that in combination with the low prices the UKCS industry would have to close. But the tech-based cost-cutting was so great, it overcame these dramatic hits on economic viability

Electro-Kevin said...

There's even a job for me at the FT.

How many sugars would you like with your tea ?

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Mark Wadsworth said...

Well, I was going out on a limb with my oil price projections above, but in the past couple of months it has fallen from $110 to $78 or something.

It's to do with very inelastic supply and very inelastic demand.

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