Heribert Hoover is one of the most misunderstood presidents of the US ever. His presidential term was overshadowed by the fallout of the world economic crisis as he took the reigns of the country right after the fateful year 1928. The great depression forever carries his name – undeservedly so.
Hoover was a mining engineer and a man of the land and the author of one of my favorite quotes from history.
“I am proud to have been born in Iowa. Through the eyes of a ten-year-old boy, it was a place of adventure and daily discoveries – the wonder of the growing crops, the excitements of the harvest, the journeys to the woods for nuts and hunting, the joys of snowy winters, the comfort of the family fireside, of good food and tender care.” Herbert Hoover
I love this quote.
Like few others it expresses the best and ultimate American virtue, to live with the seasons, the years, to adapt and optimize make the best of what one was given and repeating the cycle all over again.
The American farmer, the cornerstone of American culture, embodies whats best about America. Someone who lives with the endless cycle of sowing, growth and harvest. You get what you sow, you will never get more than you sow but you usually get what you sow. What you get, what you have, depends only on your efforts, your diligence. Work hard, and you will reap the harvest. There are no good things to expect if you dont do your work.
Compare that with the mindset of oil extraction in most countries but most of all in NOPEC countries. Oil is considered to be a bounty from heaven that was given to the good people of whatever country we talk about in order to be exploited for their benefit. Its a freebie that fell on their head. No sowing required. You get what you have not extenuated yourself for.
You play for the big win, the grand paycheck, the bounty from the heavens. No wonder that business models reflect that attitude. Oil projects are big, grandiose, have many years or maybe even more than a decade of lead time and once the oil flows, it will provide cash flow for decades as those monster investments must be paid back.
And the very nature of big oil played to that business model. As it only skimmed the easy oil on the top so far, a revolving work schedule that repeats every year in order to prepare the harvest was not required. One went in for a herculean up front effort and then you watch the nodding donkey pumps to their work forever after. Thats not the reality of it in every single case or not even in the majority of cases as even traditional oil fields need maintenance – but the mindset is ever present.
Traditional oil is a “get rich quick or die trying” attitude. I had my toes in quite a number of businesses from the law to tourism and personal security and finally energy but in no there business have I gotten so many proposals for all kinds of shoddy deals. They all start with “I know someone who has access to decision makers for oil cargos”. Needless to say that they are all as real as a pink unicorn in a gay bar.
But as we have seen in the first post of this series, easy oil is over. The Casino model is still on and it will take decades for it to die if it ever does. Most people abhor hard work and want to believe that the big, lucky strike just waits for them to come down and take all their problems away with one stroke. Its a basic human urge.
The farming model (I also like to call it oil field milking) transforms more and more into – developing acreage, learn how it behaves and how external influences optimise flows and then milk it every year through re-stimulations. No sitting and waiting for the nodding donkeys to do their work but rather constant monitoring of every single well, understanding its particularities and work the reserve in order to counteract negative influences and act to improve on positive developments.
Its like farming. Todays farmers can only trust in what works. They are the ultimate no-nonsense people and as such they are on the market every second. They look into niches, adapt to short term developments and fine tune their oil/gas flow in conjunction with cash flow. They deal with weather on a daily basis, they see things over generations, they rely on wisdom of the old but they try new stuff on a small scale to see where they can tweak and improve. They cut duds loose quicker than a politician can say “energy politics”. They know hoe plants and animals live and thrive and profit from what works. They are like the new breed of oil men (and women).
Like in every grand industrial shift, there will be rivers of corporate blood as the new players try to find their path. They try out all sorts of different solutions, many of them will eventually turn out to be bad ones.
But the few avenues that show real promise will lead the oil world into a new paradigm that will eventually do away with the traditional oil as we know it. Does that mean that there will only be shale in the future and traditional oil will go away. No way – old unreformed industries sometimes limp along for decades before they bite the dust for good and they might even come out with sorties of fresh innovation in order to make up lost ground. But in the grand scheme of things, the gritty sweaty redneck in the brush has already beaten the Saudi Princes and the Russian tycoons. Their “no-nonsense” attitude will enable them to survive things the Casino gamblers cannot hope to survive.
There is another aphorism that I like “When you have lemons, make lemonade”.