How to Thrive in an Era of Volatile Oil Prices

Volatile oil prices present both challenges and opportunities for producers, energy service companies, and consuming and processing industries. Capturing the opportunity demands a structured approach, the attention of senior management, and rapid action. This is a tall order, but a critical one, as the steps that companies take in today’s exceptional market will dictate their competitive position in the next phase of the cycle.

In crafting responses to this environment, companies should keep in mind three lessons from past oil cycles:

Sharp and protracted swings in oil prices, such as the one being experienced now, do not last forever. Indeed, the current down cycle is already the longest peak-to-trough progression of any of the sustained oil-price declines since the 1980s.
The opportunities and threats typically emerge early. Markets are quick to price in weakness, and valuations can be hit hard. This is evident today in the offshore seismic sector, for example, in which some valuations have fallen by more than 50%.
A fast response is critical, whether it be positioning the company for survival, communicating to investors, or capturing emerging opportunities.

An analysis of oil price declines since 1986 (peak to trough) reveals that the current price decline is unusually long-lasting.

Lower, and More Volatile, Oil Prices: What They Mean and How to Respond