Maybe in better times, the staggering population of the millennial demographic would be a hurdle over which Big Oil could easily leap. But times are tough, and that isn’t our today.
Today, we have Saudi Arabia, Iran, and OPEC officials swaying the oil market with each strategic utterance. We have uber-low prices that have caused many to go under. Big Oil debt is soaring, and lenders are growing skittish. We have record production in Saudi Arabia, and Iran is again pumping at near-sanction levels. We have U.S. shale that is still producing at high rates, albeit with far fewer rigs in action, and with far fewer employees. U.S. shale survivors are leaner and meaner, and Saudi Arabia is desperately trying to keep its head above water, refusing to relinquish market share, no matter what the cost. It’s been a taxing time.
And now, enter the tax to the oil industry—the millennials.
Big Oil should take a note from other markets that have already had to address the impact millennials will have: ignoring this market segment—although a tricky to define market segment—would be a costly ignorance indeed.
From where does this power come?
In size, this generation—aged between their late teens and mid-30s—has overtaken the baby boomers in size in some countries and comes close in others. By 2020, according to a Brookings Institution analysis, 1 in 3 U.S. adults will be a millennial. The shifting of demographic ratios in the U.S. is not just due to the increase in number of millennials—spurred on by immigration—but also by the simultaneous decline of the Baby Boomer generation—what used to be the largest demographic group in the U.S.
Divestment Crusades – Divesting from Big Oil in a big way
We’ve already started to see some pushback on Big Oil with U.S. college campuses engaging in what many are calling a divestment crusade. The idea is that with investors pulling out, Big Oil will be forced to close up shop or change tactics. Although the organizations involved may not be comprised entirely of millennials, it would be nothing without the millennial generation’s support through signatures and 70s’-style sit-ins. Related: Is Nord Stream 2 Still A Good Deal For Europe?
The total divestments, including Syracuse’s $1.18 billion removal of its endowment in coal, oil and gas, remain a mystery, but is probably shy of the $3.4 trillion that 350.org’s Bill McKibben claimed last December—but it’s still probably a pretty big figure.
What Do They Want, Anyway?
Not all Millennials are flat-out anti-oil, but it’s important to understand where this generation is coming from.
Millennials want options. Millennials are on track to be the most educated generation to date. Although education is no substitute for wisdom, educated (and technically savvy) millennials are willing to research products before they buy. They’re also the most diverse demographic, so they want different things. The time is ripe for new niche markets within the energy industry to form. This may include cars that use different kinds of energy, or cars capable of using several different kinds of fuel. It’s not just low-prices that are forcing the industry to rethink its strategies—soon it will be the Millennials. It may be wise for the industry to change their entire way of thinking now, based on who’ll be buying—and investing.
Millennials need to be passionate about where they work. Clearly this is bad news for the oil industry. Although oil companies are cutting jobs right now, the industry has found it difficult to attract young professionals over the last 15 years, says Pavel Molchanov, an analyst with Raymond James. "If students in college are thinking about engineering, many have gone into civil, computer or biomedical engineering but not petroleum engineering," he says. "It's regarded as a dirty industry and there are some safety concerns, and it's just not seen as very sexy."
The vast majority of Millennials would prefer to work in “greener” companies. For now, the dollars are just not there, but as Millennials age and most of the dollars become theirs, this may shift, and the industry could face an even greater recruitment challenge. Companies also need to be transparent for millennials to stay onboard, and even with this transparency, millennials are well-known for their job-hopping tendencies. The very notion of a lifelong job is being called into question, making it more and more difficult for the industry to recruit skilled workers. This is exacerbated when oil majors go for long periods without hiring, causing the gap between the company’s oldest and newest workers to widen. Oil companies who don’t have specific plans in place to transfer knowledge from older to younger workers may suffer, and companies should work to find new ways to recruit and promote the industry. Related: Why Is Rio Tinto Giving Diamonds Away For Free?
Millennials vote with their dollar. If voting were conducted online, they might be encouraged to vote this way as well. This dollar vote probably doesn’t apply to oil, aside from the fact that millennials buy gas directly. Still, major DOJ investigations, such as those regarding Exxon, could affect the way Millennials accept or reject a car or gas companies as whole, be it for employment, purchasing, or investing. It may even spill (pun intended) over into companies that invest in oil and gas, so the industry would be wise to work on cleaning up its namesake. Millennials are largely brand loyal, so a spill, repeated spills, emissions frauds, and legislative frauds that are met with apathy today may very well be a death blow tomorrow.
Millennials are online. Millennials don’t watch television ads for the most part. While Generation Y had DVR to fast forward through commercials, Millennials have Apple TV, Netflix, and Hulu. Marketing campaigns about green efforts (smart) and recruitment promotions (smarter) should incorporate social media—which is ever changing. The best thing the oil industry can do to reach out to Millennials in this regard is to employ Millennials to reach their own generation. Because social media is fluid, social media trends are quickly outdated.
Millennials are political, conditionally. Millennials show up in the polls when they are passionate about something or someone. Voting isn’t considered very tech savvy, which may hurt voter turnout within this group, and we already know that targeting this group is tricky. So reaching out to get Millennials to the polls may be unsuccessful for now. That is, unless they are passionate about a cause. What this means for the industry is that players interested in sticking around should take care to not be on the wrong end of a cause.
It’s unlikely that Millennials will bring oil to its knees in the short-term, because without a viable alternative, the world as we know it would come crashing to a halt. But the old way of doing things, as oil companies found out during the price pinch, may not work for much longer, and those companies will have to change to survive. Although the narrative could spell doom for major players, it doesn’t have to be that way—it just has to strap on the idea that there will be a new set of demands from Millennials.
By Julianne Geiger for Oilprice.com
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