In the 1960s, a pioneering team of economists, engineers, and scientists at Shell began developing the company’s first scenarios. These forward-looking studies explored potential futures and their implications for Shell. By 1973, these early scenarios had been shared with Shell’s management, daring them to confront the unthinkable: What if the world faced a major oil crisis?
When the Yom Kippur War broke out in October of that year, the West’s support for Israel provoked oil-rich Arab states to impose an oil embargo. This led to fuel shortages, a global recession, and a massive stock market crash. While the world reeled from the crisis, Shell’s leadership was prepared. Thanks to the early work of its Scenarios Team, the company had already imagined such a scenario and considered its potential impacts.
The early scenarios, led by Pierre Wack—often called the “Father of Shell Scenarios”—helped challenge conventional management thinking. Wack pushed Shell executives to discard assumptions, including the prevailing belief that the global oil supply was infinite. These disciplined exercises in foresight not only prepared Shell for the crisis but also outlined strategic choices the company could make to mitigate the impact. As a result, Shell was able to weather the volatility of the 1970s and secure billions of dollars in financial gains through informed decisions, such as selling or not replacing certain refineries and installations.
A Legacy of Preparedness
The success of Shell’s 1973 scenarios established the company’s reputation as a pioneer in using scenario planning to inform strategic decision-making. Over the decades, Shell has continued to use scenarios to anticipate global economic, social, and political changes and their business implications. Summaries of these scenarios have often been shared publicly, contributing to broader societal debates and insights.
Today, Shell’s Scenarios Team faces a new set of challenges in an increasingly complex and uncertain world. Economic and political turmoil, rapid urbanization, resource scarcity, and a growing global population are driving heightened demand for sustainable energy, water, land, and food. These factors are fueling tensions and underscoring the importance of foresight.
Looking to the Future
Building on decades of success, Shell’s Scenarios Team is evolving its approach. Recognizing the inherent complexity and interconnectedness of global systems, the team now combines detailed, focused analysis with broader, panoramic perspectives. This dual approach aims to provide clarity in a world where outcomes are increasingly unpredictable.
By 2013, the team will unveil new scenarios focusing on critical issues shaping energy and environmental systems in the 21st century. These include the interplay between energy, water, and food systems, as well as the impact of accelerated urbanization. Shell’s ongoing commitment to scenario planning ensures the company remains resilient and ready to navigate future uncertainties, just as it did in 1973.
