Oil prices have rebounded after being flat for months. Crude oil actually traded below the $0 mark briefly in the spring of 2020, thanks to the historic economic disruptions precipitated by the COVID-19 pandemic.

Prices recovered somewhat after that but remained flat throughout 2020. The year 2021 has enjoyed a robust recovery. The crude market surged back, and prices continued to rise in the final quarter of 2021. They recently reached their highest level in six years. 

Experts say considerable uncertainty remains for 2022, however. Next year is viewed as a period of transformation. Analysts with Deloitte say oil executives will strive to instill stricter capital discipline and focus on company financial stability.

The impetus to deal with climate change will necessarily bring a significant rethinking of the business model for oil companies in general. Simply managing the rise and fall of oil prices is no longer viewed as a reliable business model.

Expect oil companies to capitalize on higher oil prices to enact specific changes that will focus on a transition away from fossil fuels and toward new opportunities in sustainable energy systems. In fact, a recent survey of oil and gas executives revealed that 76% of them are focused on “energy transition” opportunities.

One of the biggest items in that regard is an aggressive effort to bolster carbon capture technologies. If the fossil fuel industry cannot find a cost-effective way to cut carbon emissions, the future of burning gas and oil is on seriously unstable ground.

Another primary area of attention will be efficiencies in oilfield services (OFS). This was a sector already slashing costs and streamlining operations before the COVID era. 

In the past, OFS has been dependent on upstream cycles, but now there will almost certainly be a shift to rapid energy transformations along with significant changes in oil and gas revenue and spending models.

Oil companies are gearing up and formulating strategies to cope with the burgeoning increase in competitive energy sources, such as hydrogen, electricity, and biofuels.

Consider that the recently passed $1 trillion infrastructure bill in the United States will call for the establishment of more than 500,000 charging stations distributed nationally for electric cars. Each charging station means one more competitor for a traditional gas pump.

Thus, while the cost of crude oil is likely to rise over the next year and perhaps beyond, Big Oil sees the writing on the wall. It’s an industry that must transform or face a highly uncertain future.