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What Oil And Gas Can Learn From Aviation

A new cyclical reality makes energy companies rethink operations

It’s a transformative time for the oil and gas industry. OPEC production controls are unable so far to overcome a persistent oversupply.

North American shale producers keep a cap on prices as they adjust output to capitalize on market peaks. And then, there are the growing risks to the oil and gas industry from a future less dependent on fossil fuels.

The new economic reality for oil and gas: While the cyclical lows may look the same, the swing back into good times is likely not to see prices exceed past highs or even come close to reaching them. For the foreseeable future, many analysts predict crude oil will not top $60 a barrel, which means fewer profits and less money to plow back into asset-intensive operations.

Oil and gas executives are reacting appropriately to this new normal, seeking ways to maintain tighter reins on an industry that has always functioned like a federation of very independent states. While some of the larger industry members provide models for improving performance, the oil and gas industry also may want to consider reshaping some of its operations around a historcally cyclical and volatile, asset-intensive industry with far tighter profit margins – the aviation industry.

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AVIATION’S TIGHTER REINS RESULT IN DOWNWARD TREND IN AIRCRAFT INCIDENTS
After a rocky 1990s, airline efforts in standardization and centralization are making a difference in safety

Aircraft Incidents

Note: Based on incidents reported to the Aviation Safety Reporting System (ASRS) between 2000 and 2016 that resulted in aircraft damage, flights cancelled or delayed, maintenance actions, physical injury, or incapacitation, or evacuation.


Source: ASRS, Oliver Wyman analysis


About Authors

Bill Heath is a London-based partner in Oliver Wyman’s Energy practice, Robert Peterson is a Houston-based partner in Oliver Wyman’s Energy practice, David Marcontell is an Atlanta-based vice president in Oliver Wyman’s Aviation, Aerospace, and Defense practice, and Susie Scott is a Houston-based principal in Oliver Wyman’s Energy practice.

 

This article first appeared in Forbes.

What Oil And Gas Can Learn From Aviation


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