Solutions looking for problems: Idle capacity and resource repurposing

Is a low oil price only bad for renewables?

The challenge

Oil and gas firms respond to high oil prices by investing in exploration and production within the industry. Following an oil price decline, however, they face a shortage in investment opportunities and stall production. Such downturns affect both oil and gas producers and the supply chain, and sets up incentives to potentially redeploy and repurpose existing engineering capabilities into new areas.

The intervention

Using text analysis and machine learning methods, this project will explore the extent to which oil price volatility is reflected in firm communications such as annual reports. In particular, it will aim to study the extent to which oil and gas firms, relative to other firms in the energy industry, focus on redeploying resources and repurposing existing expertise in new settings following an oil price shock.

The impact

Climate change is one of the grand challenges humanity is facing. Developing countries are set to be hit by it the hardest, having contributed to the problem the least. The ability to build on oil and gas technologies, such as maritime expertise to advance developments in low carbon solutions, such as offshore wind may prove to be an important piece in the energy transition.

Aldona Kapacinskaite is a PhD student, Strategy and Entrepreneurship, graduating class 2021 at London Business School. Aldona’s research explores drivers of organisational innovation and technological change. In her dissertation, she studies how external pressures such as industry downturns and knowledge leakage risks affect innovation outcomes within industries, across the supply chain and across industries.

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