Dave O’Reilly announced today that he will be retiring from his position as chief executive and chairman of Chevron at the end of the year. He says he always intended to retire after 10 years at the top. Besides, the company is in a position of strength and he has built a strong management team.
Those are all good reasons to leave. But I cannot help thinking that he is getting out at just the right time.
The global oil industry is changing. It is becoming tougher to replace production. Oil-rich nations are increasingly putting barries up against letting the international oil companies acquire new resources in their backyards.
Companies are having to turn to tar, rock and deeper and deeper oceans in the areas they can drill to find new deposits of oil and natural gas. Meanwhile, politicians are looking for ways to make it more expensive for the world to run on the fossil fuels upon which these companies have been built, debating carbon taxes and cap and trade legislation.
Chevron has done well in the age of oil and gas. It is unclear what lies ahead. Certainly oil and gas will be powering the world for at least a few decades to come. But beyond that it is unclear whether any of the new and increasingly outlandish ideas being floated around today will lead to breakthrough technologies for tomorrow. Everything seems to be on the table, from fuel made from cow maneure and chicken fat to carrying on with business as usual and burying massive amounts of carbon emissions under the ground.
It really is unclear what the world will be running on a few decades out. And companies of Chevron’s size say they think long term. It is becoming increasingly difficult to do that. What will be Chevron’s fuel mix in 30, 40 years? Who will be buying it? And how much in punitive taxes will it cost the company each year to produce it? There are a lot of unknowns out there.
Mr O’Reilly is getting out while the getting is good. Figuring out the answers to the world’s energy problems now falls to his successor, John Watson.