In meteorology, the “Fujiwhara effect” is a phenomenon that occurs when two cyclones come together to form a larger storm. In April 2020, a Fujiwhara effect of sorts hit the global oil industry when an oil price war and a global pandemic combined and sent oil prices plummeting, and the industry itself into crisis. Amid the aftershock of the oil industry taking this one-two punch, speculation rages over when we will reach “peak oil demand”. UK energy major BP is the latest to forecast that demand will peak early this decade.

Despite the obsession with the concept, what is arguably more important than peak demand is the notion of “peak value” –  the ability of oil and gas companies to secure adequate investment and returns. This lack of investment into the industry is the single biggest threat to its survival, a point not lost on companies that have already been scratched off the list of green investors.

Alarmingly, it seems the point of peak value could have already passed. A decade ago, energy accounted for roughly 15 per cent of the S&P 500, afigure which has now fallen to below 3 per cent. This dwindling equity market share has come about through a combination of poor financial and environmental, social and governance performance in the sector, and it is simply not enough for an industry that needs to invest between $2tn and $4tn a year to meet both growing energy demand and the drive towards decarbonisation. So how can an industry on the verge of extinction revive itself, when the wider economic, social and geopolitical conditions could hardly be less accommodating?

With seismic changes, for a start. If the industry wishes to maintain its social licence to operate, it needs a major reset in terms of responsible leadership and ESG performance. Nothing short of a wholehearted embracing of the energy transition will be enough. This needs to happen both through decarbonisation of the hydrocarbon system and through investments in the new energy system: renewables, storage and CCUS (carbon capture, utilisation and storage).

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

Recent announcements from several European oil majors and integrated players to expand their low-carbon portfolio show they are seeking to course­ correct, but they will be some way off reaching net zero by 2050 unless change happens at pace. These companies must also re-establish their reputation for technological innovation. The sector has historically been at the forefront of technical and computing advancements, gathering and processing data in volumes and at a speed

that few industries could match. But it has failed to expand the application of this from recovering resources to driving returns. It has become a laggard in this respect and needs to make up the lost ground by investing strategically in digital technologies.