Shell scenarios: What really happened in the 1970s and what may be learned for current world prospects

Technological Forecasting and Social Change

Volumn 79, Issue 1, 2012, Pages 186-197

  Jefferson, Michael ^a  

^a LONDON METROPOLITAN UNIVERSITY   (United Kingdom)

Author keywords

Inbuilt conservatism; Middle East experience; Missed opportunities; Presentation key factor; Scenarios; Unknowable future

Indexed keywords

TECHNOLOGICAL FORECASTING;

INBUILT CONSERVATISM; MIDDLE EAST EXPERIENCES; MISSED OPPORTUNITIES; PRESENTATION KEY FACTORS; SCENARIOS; UNKNOWABLE FUTURE;

BUSINESS CYCLE; CORPORATE STRATEGY; FUTURE PROSPECT; GAS INDUSTRY; INDUSTRIAL PERFORMANCE; INDUSTRIAL PRODUCTION; OIL INDUSTRY; UNCERTAINTY ANALYSIS;

EID: 84860919848     PISSN: 00401625     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.techfore.2011.08.007     Document Type: Note

References (55)

1. See: Pierre Wack: "Scenarios: uncharted waters ahead", Harvard Business Review, September-October, 1985
2. "Scenarios: shooting the rapids", Harvard Business Review, November-December, 1985
3. Subsequent papers on Shell's scenario process and a selective analysis of those who contributed include: P.W. Beck: "Corporate Planning for an Uncertain Future", Shell UK Ltd., 1981 (reprinted in 'Long Range Planning', Vol. 15, No. 4, 1982, pps. 12-21).
4. There had been brief reference to Shell's scenario work in René Zentner's paper: "Scenarios, Past, Present and Future" in the previous issue of 'Long Range Planning'
5. Kees van der Heijden: "Scenarios: The Art of Strategic Conversation", John Wiley, 2005
6. Michael Jefferson: "Economic Uncertainty and Business Decision-Making" in Jack Wiseman (ed.): "Beyond Positive Economics?", Macmillan, 1983.
7. Art Kleiner: "The Age of Heretics", Nicholas Brealey, 1996 (which provides a good summary of Shell's early scenario work)
8. Gill Ringland: "Scenario Planning" (which covers, especially in Part III a later period in Shell's scenario planning than considered here)
9. Peter Schwartz: "The Art of the Long View", Doubleday, 1991 (which is cursory about Shell's scenario work in the 1970s, more expansive for the 1982-1987 period while working as Pierre Wack's successor in Shell when - as he revealingly puts it - "the co-ordinator of Group Planning was pursuing his own set of ideas about organizational learning", p. 11).
10. In response to a questionnaire sent to then current and former members of Shell's Group Planning Division, a 65-page report backed up by 24 pages of Appendices was issued in November, 1995: "Reflections on the Evolution of Scenario Planning in Shell 1971-1992", which is valuable but not the final word on the subject
11. Other studies have also made claims about Shell's scenario work, not always accurately
12. Peter Cornelius, Alexander Van de Putte, and Mattia Romani: "Three Decades of Scenario Planning in Shell", California Management Review, Vol. 48, No.1, Fall, 2005, has been discussed in the paper above.
13. See also, for example, Allen Hammond's "Which World? Scenarios for the 21st Century", Island Press, 1998, where it was claimed: "Scenarios also enabled Shell to anticipate the 1986 collapse of oil prices, gaining the company additional commercial advantages", p. 14.
14. The actual story is retold later in this paper, although an Oil Price Collapse case was examined within Shell's Group Planning from January, 1985
15. One of the few adversely critical papers written on Shell's scenario process, and worth reading, is: Alex Wright: "A Social constructionist's deconstruction of Royal Dutch Shell's scenario planning process", Working Paper Series 2004, University of Wolverhampton Business School
16. Jimmy Davidson, There was a view that the author, having worked with Frank McFadzean as well as Sir David Barran before joining Shell, had been propelled into Shell at Frank McFadzean's instigation. Jimmy Davidson confirms in the same personal communication that: "it was David Barran who brought your name forward." (former Shell Group Planning Co-ordinator), personal communication, November 21, 2010.
17. Keetie Sluyterman, Royal Dutch Shell: "Company Strategies for Dealing with Environmental Issues", Harv. Bus. Hist. Rev. 84 (2) (Summer 2010).
18. Michael Jefferson: "Economic Disturbances: Part I - The Background", May 29, 1974; "Economic Disturbances: Part II - The Prospects", June 5,1974
19. Michael Jefferson, "OPEC Oil Revenue under Varying Revenue Assumptions", September 9 1974, p. 2.
20. Michael Jefferson, "OPEC's Investment Policy", October 8 1974, p. 3.
21. A welcome current view is: Mahmoud A. El-amal, Jaffe Amy Myers, "Oil, Dollars, Debt and Crises: the Global Curse of Black Gold", Cambridge University Press, 2010.
22. Michael Jefferson, "Conflict and Co-operation in an Era of High Oil Prices", Paper Delivered at the University College at Buckingham Conference, June 25 1975
23. Michael Jefferson, "How Quickly Do Cartels Collapse?", October 29 1975
24. I still have in my possession two of M.A. Adelman's papers published in 1986 which indicate that he had learned much about oil prices in the succeeding eleven years.
25. Michael Jefferson, "The OPEC Current Account Surplus", September 25 1978
26. Sir David Barran was also Chairman of the Industrial Policy Group, a London-based organisation, from 1969 until June, 1971, and a Member until 1973 while Michael Jefferson was Deputy Director of the same organisation. Linked to meetings held under the auspices of a Paris-based European Economy Foundation, the two discussed prospects for the oil sector, particularly as a result of forces at work in the Middle East. Lengthy discussions took place in Paris and in Rome between June, 1970 and November, 1972, as well as in mid-flight. One evening, returning over London in the Shell executive jet, Sir David opined that the best place to work was in the Shell Centre since it was the only view of London which did not have the building spoiling the view. Only a few days later Jefferson was surprised to read in "The Times" of London a letter from Sir David enthusing about the architectural merits of the Shell Centre building and the outstanding quality of the materials used in its construction.
27. Shell Group Planning, "A Probabilistic Approach to the Forecasting of Upstream-Government Take on Crude Oil Exports: 1970-1985", PL/52, January 1971, p. 3.
28. The details can be found in Exhibit II, page 78, of: Wack, Pierre: "Scenarios: uncharted waters ahead", Harvard Business Review, September-October, 1985
29. Henk J. Alkema, "Memories and Lessons from 30 years in Strategic Planning", Paper Delivered at a Seminar in Oxford, February 12 2008.
30. May, 1972 report, page 1
31. January, 1972 report, page 1
32. May, 1973 report, page 11
33. Economists Advisory Group (Professor E. Victor Morgan and Graham Bannock were responsible): "Effects of Prospective Balance of Payments Surpluses of Oil Producing Countries on the International Trade and Payments", July, 1972, page 43. Coincidentally, Jefferson was Manager of Economists Advisory Group, 1986-1988.
34. Hans DuMoulin headed up the Oil Analysis Division of Group Planning, supported by Alan Clarke, Doug Wade, John Curtis and others. Their analytical contributions have never been adequately reflected in the literature on Shell's scenario planning.
35. Doug Wade, Personal Communication, September 15 2010
36. January, 1977 report, page 47
37. Hans DuMoulin, Personal Communication, September 17 2010
38. Hardin Tibbs, "Pierre Wack: a Remarkable Source of Insight", NetView, GBN Worldwide, 1998, p. 5.
39. "Scenarios for the Next Five Years: 1978-1983", Group Planning, June 1978, p. 50.
40. "History and Strategy in Shell", January 6, 1986, p. 21.
41. This paper made the point that with the scenario team believing that it was necessary only "to capture the microcosm of managers with the scenario message ... this would automatically trigger an appropriate strategic response." (p.19) The paper in fact adversely criticised the lack of 'top down' strategic direction (p.55).
42. Hans DuMoulin, John Eyre, "Energy scenarios: a learning process", Energy Econ. (April 1979) 76-86.
43. André Bénard, "World oil and cold reality", Harv. Bus. Rev. (November-December 1980) 91-101.
44. 'Producer Miscalculation' and other matters, were discussed quite critically, in: Michael Jefferson: "Economic Uncertainty and Business Decision-Making", in Jack Wiseman (ed.): "Beyond Positive Economics?". Macmillan, 1983. ISBN 0 333 32668 7.
45. Ged Davis, "Scenarios as a Tool for the 21st Century", Probing the Future Conference, Strathclyde University, July 12, 2002, p. 4.
46. A critical view of the emphasis on societal value changes and lifestyle shifts appeared in: Michael Jefferson: "Historical Perspectives of Societal Change and the use of Scenarios in Shell", in Brian Twiss (ed.): "Social Forecasting for Company Planning", Macmillan, 1982. ISBN 0 333 27076 2.
47. Shell Supply and Marketing: "Oil Review 1986-1990", February, 1986 (especially Chart 16, 'Possible oil price futures', on p. 31).
48. Shell Supply and Marketing: "Group Oil Operations Report", March, 1986 (especially "Crude price scenarios for 1986", on p. 9).
49. Paul Tempest: "How Shell has coped with Oil Price Collapse - Some points for Public Affairs Today", April 1, 1987
50. Paul Tempest showed (Viewgraph 6) our view that there was a 60% chance of Brent crude oil prices achieving a sustained recovery into the US$ 15-20 per barrel range by July, 1986, rising to 70% by that September
51. Krister Sundström, "Long Term Energy Scenarios to the Year 2000 - EU Region: 1991 Planning Cycle", May 15 1981, p. 4.
52. See: Jefferson, M., Voudouris, V: "Oil Scenarios for Long-Term Business Planning: Royal Dutch/Shell and Generative Explanation, 1960-2010", 2011. MPRA 27910 Paper, University Library of Munich, Germany. Available from: http://econpapers.repec.org/paper/pramprapa/27910.htm.
53. Voudouris, V., Stasinopoulos, D., Rigby, R., and Di Mario, C.: "The ACEGES laboratory for Energy: Exploring the production of crude oil", 2011. 'Energy Policy' at http://www.sciencedirect.com/science/article/pii/S0301421511003867.
54. P.W. Beck: "Corporate Planning for an Uncertainty Future", Shell UK Ltd., 1981.
55. A more recent warning, in the same vein but relating to modeling in the run-up to the recent financial crisis, appears in Angela Wilkinson et al: "Beyond the Financial Crisis: The Oxford Scenarios", Saïd Business School, Oxford, 2010. p. 16.