CONSULTING FIRM EY recently took a nationwide survey of US consumers and another of energy executives and found that their views about the oil and gas industry differed dramatically. As you might expect, the executives' response was positive. However, US consumers, especially the younger generations, expressed largely negative reactions to questions about the fossil fuel industry and its future.
Although consumers agree on the importance of oil and gas to the US economy and to creating jobs, fewer than half of the consumers polled trust the industry or say they would welcome it to their community. In addition, a majority (53%) of consumers believe the industry causes more problems than it solves.
"The energy industry is providing products the public demands," said Deborah Byers, US Energy Leader for EY. "But clearly, there is a rift between what consumers want, how they want it, and the public's understanding of the industry. This gap poses a challenge for the future of oil and gas companies and may influence their interactions with prospective employees, communities near current or future operations, shareholders, and even with consumers of energy products."
The report shows that industry leaders and consumers don't always see eye to eye, but there are some areas of agreement. When asked whether oil and gas should or should not be the primary sources of energy in our lives or if oil and gas should be the primary sources of energy in our lives until cleaner fuels can replace them, both industry executives (78%) and consumers (58%) agreed oil and gas should be the primary sources of energy until clean fuels can replace them.
Interestingly, the survey showed that 75% of industry executives believe the industry does a poor job communicating with the public. In fact, when presented with the survey findings, the executives acknowledge the negative findings are the result of poor - or absent - communication.
Teens and younger adults specifically expressed feelings of being overlooked by the industry. In general, the younger the respondent, the less they agreed with the statement "Oil and gas is good for society." Only 3% of millennials see oil and gas as good for society.
Is this a perception problem or is there something else going on?
On May 10, EY hosted a lun ch meeting with reporters in Houston to discuss the survey findings. The EY executives present suggested that the problem was one of knowledge, or education. If the public knew what the executives do, they would realize that it is impossible to make such a rapid transition from hydrocarbons to renewable energy.
"They don't have as many of the facts," said John Hartung, a US strategy principal with EY. "The executives have run the numbers, and the younger generations have not."
This is correct, of course. Barring some amazing unforeseen technology breakthrough, we simply cannot break away from hydrocarbons in the next few decades. However, rapid strides are being made, especially in the field of power generation, as we transition away from coal towards cleaner fuels, which of course includes natural gas.
Environmental concerns are not the only issue for the younger generations of energy consumers, however. We would be selling them short if we think this is their only problem the petroleum industry. As a parent of two millennials, I know they are intelligent enough to look at the total picture. They have observed the cyclical nature of the oil and gas industry as some of their friends have pursued careers in the industry only to be cast aside (first in, first out) during a downturn. Many of these young professionals - engineers, geoscientists, and computer experts - have already found positions in other fields that aren't as vulnerable to commodity price cycles. They have moved on with their lives and won't be returning to their old roles when the industry transitions into an up cycle again. This is especially unfortunate for the industry because it comes at a time when baby-boomers are starting to retire in large numbers.
Another reason young people have a dim view of the oil and gas industry is that they see that compensation is not always based on performance, especially in the executive ranks. It's not uncommon for CEOs and other top executives to actually see their pay increase during a downturn when the company is not profitable.
Consumers and company stakeholders aren't blind to this. Investors recently rejected a compensation plan for ConocoPhillips' top executives, signaling disapproval of the company's pay levels last year. A spokesman for the company expressed his disappointment that the proposal didn't pass and said the company planned to engage with their shareholders to better understand their views regarding the executive pay packages.
EY is correct in saying that the industry needs to do a better job of informing the public about the importance of oil and gas. The consultants are also right when they suggest the need to find common ground that oil and gas companies can build upon to increase consumer acceptance and appreciation for what they provide. However, we should also consider that some of the divide between the public and the industry is not just a PR problem - it's a real problem that the companies need to address.
