In fact, the same message is going to the crews at Shell, BP, Chevron and all the other majors who last week reported fat profits, but very troubling outlooks.
The problem isn’t the cash being generated. It’s where it’s coming from that’s the worry.
In most of the oil company profits reported, any increase came from higher refining margins, or higher prices charged to retail customers.
Production, the lifeblood of any oil business, was down, or flat at best.
No one in the petroleum business needs to be told there’s a problem looming – lack of exploration success is a universal phenomenon, and a key factor in the peak oil debate.
But last week peak oil, as far as the majors are concerned, arrived with a bump.
The question from the results is, “What now?” Will customers and politicians tolerate rising profits from the majors as they contribute less oil to the economies in which they operate?
Slugcatcher fears not. He reckons last week’s burst of “higher profits for less oil” will send a shock through the political and chattering classes, and the target of their talk will be big oil.
Consider the evidence. ExxonMobil posted a modest profit slide from $US10.4 billion to $US10.3 billion for the quarter ended June 30. But, that was from a 1% fall in oil and gas production to 4.12 million barrels of oil equivalent a day.
Shell lifted its profit by 18% to $US8.67 billion. Production fell by 2.3%.
BP lifted profit by 1.5% to $US7.38 billion. Production fell by 5.3%.
Chevron’s profit was up 24% to $US5.38 billion, but much of that came from the sale of a 12% stake in the Dynegy business. Output from Chevron’s own wells was down 1.5%.
There’s a pattern here – an ugly pattern that cannot be ignored – and it spells big changes ahead for big oil.
For starters, it is now painfully obvious to the world that the era of the mega oil company, as invented by John D Rockefeller a century ago, is coming to an end.
Declining production is something John D and his cronies never contemplated – but that’s what is happening.
Big oil must come to grips with its fate, and devise a strategy for future growth that involves more than simply slugging the motorist with higher refining and marketing costs.
Politically, that approach is suicide.
The future lies in two directions. First, big Western oil companies must learn how to deal with big national oil companies – because one side of that equation has the expertise to find and extract oil, the other has the oil.
Secondly, as big oil snuggles up more closely to some rather nasty regimes around the world, the West will become the playground of small oil, and specialist petroleum producers.
Just as the old oilfields of Texas have been left to investors happy to tap the last of the attic oil, so will the rest of the western world become the place of the small, specialist producer.
The only questions are whether big oil breaks up into a series of small producers, or tries to buy as many small producers as possible to cling to the glorious past, or whether the national oil companies of countries like Saudi Arabia and Iraq acquire the big western firms.
Slugcatcher admits he doesn’t know how the future will unfold.
But he does know that last week’s production numbers signalled a period of significant change ahead.
