
How are international oil companies facing the pressure to transform to renewables? Professor of Global Energy Michael Bradshaw at Warwick Business School, and Mathieu Blondeel, Professor of Global Energy Governance at the Institute for Environmental Studies (IVM), VU Amsterdam, explore the map of how they might navigate the potential storm ahead.
The Oil Industry and Sustainable Energies: Risky seas ahead, or plain sailing? by Muskan Chourey, Tom Gamble, Michael Bradshaw and Mathieu Blondeel.
As the world shifts towards a more sustainable future with renewable energy sources at the forefront of it, the oil industry finds itself at a pivotal moment. Companies that have long extracted fossil fuels and subsequently sold them are facing increasing pressure to adapt.
The transition to renewable energy sources comes with transition risk – thefact that some sectors of the economy face big shifts in asset values or higher costs of doing business. As such, it’s about the speed of transition to a greener economy – and how this affects certain sectors and financial stability. One example is the global oil industry. If, say, government policies were to limit global warming to 1.5C (as stated in the Paris Agreement), then 58% of the world’s known oil reserves could not be burned. This could lead to changes in the value of investments held by banks and insurance companies in this sector of course.
On the other hand, despite the challenges, the transition also presents opportunities for those who can navigate the changing landscape.
For the oil companies, it’s a race against time to adapt, innovate and diversify before they get left behind. New research from Profs Michael Bradshaw of Warwick Business School and Mathieu Blondeel of VU Amsterdam delves into the world of transition, exploring the various strategies and tactics that oil companies are using to stay afloat in this ever-changing landscape.
To understand the response of the global oil industry to the challenges of climate change and global energy system transformation, an interdisciplinary approach is needed. By bringing together insights from multiple disciplines within the social sciences, we can better understand the actions and motivations of oil companies, assert Profs. Bradshaw and Blondeel.
Moreover, research on the political economy and socio-technical nature of global energy system transformation tends to treat the global oil industry as a monolith with common interests and strategic objectives. As such, Bradshaw and Blondeel present a ‘Transition Strategy Continuum’ as a way to categorize and analyse the strategies of oil companies.
Energy system transformation and its implications for oil companies and the global oil industry

The first factor to point out is that IOCs are a heterogeneous group, each pursuing distinct goals, with unique corporate cultures, resources, and capabilities that they seek to employ to sustain competitive advantage over their competitors. In this light, IOCs should not be treated as a monolith but instead as a varied group of corporate actors engaging in distinct political and business behaviours.
Let’s look at the often overlooked “bigger picture”. The Paris Agreement aims to limit temperature increases to 1.5 degrees Celsius, which requires a significant decrease in CO2 emissions by the end of the decade and reaching “net-zero” emissions by 2050. According to the IEA, this means ceasing all new development of oil and natural gas fields, coal mines, and coal mine extensions, as well as a decrease in oil consumption and production.
Effectively, the global energy system transformation process is happening due to climate policies, activist pressure, energy security – for example, the war in Ukraine and the EU’s response with the REPowerEU plan – changes in investors’ preferences, and technological innovations driving down the cost of clean energy alternatives. This creates significant transition risks for publicly traded IOCs, as they have a higher risk of losing their “social license to operate” due to growing climate accountability pressures and financial risks resulting from the transition to a low-carbon economy. This could result in stranded assets, which are investments in oil and other fossil fuels that may not be recovered due to reduced demand and prices.
On the other hand, National Oil Companies (NOCs) like Saudi Aramco, ADNOC, and Qatar Energy have an advantage because they have access to the lowest production costs and carbon intensity reserves. It’s also relevant to mention here that there is far less societal pressure in the Middle East for these NOCs – the jewels in the crown of their economies – to make the transition.
Navigating the energy transition using strategic management

Imagine you’re a captain of an oil tanker, navigating through the choppy waters of the global oil industry. As the energy transition changes the nature of competition, you and your crew must constantly strategize to maintain an edge over your rivals. As you plot your course, you come across two different maps – one that shows the positions of other ships in the industry, and one that highlights the resources each ship has at its disposal. These two maps, known as the position-based view (PBV) and the resource-based view (RBV), offer valuable insights as you navigate the transition to cleaner energy sources.
The PBV, inspired by Michael E. Porter’s classic five forces model, helps you understand the industry-level forces that determine your profit. You realize that in the face of increasing competition from electric vehicles, you’ll need to find a position in the industry from which you can best defend yourself. To do this, you might create products that exploit changes in demand or restructure your activities to produce a sustainable competitive advantage.
The RBV, on the other hand, highlights the resources you have at your disposal. You realize that your rivals – advanced NOCs – hold a significant advantage because of their larger reserves, lower production costs, and lack of public scrutiny. To compete, you must enhance or defend your competitive positioning by creating products or services that exploit climate-related changes in demand or restructuring your activities to produce a sustainable competitive advantage.
As you set sail, you remember the words of Porter and Reinhardt – strategizing requires both ‘inside-out’ and ‘outside-in’ thinking. You take stock of your impact on the climate and put strategies in place to reduce it. You and your crew are ready to navigate the energy transition and position your ship for success.
Both types of competition, PBV, and RBV can co-exist which makes these approaches complementary instead of contradictory. The RBV and dynamic capabilities literature can be used to expand understanding of the oil industry by providing a way to study individual company behaviour and heterogeneity in capabilities and resources at the company level, opening the “black box” of the industry.
The Oil Industry: Assessing transition strategies
Profs. Bradshaw and Blondeel’s research introduces a novel interdisciplinary ‘Transition Strategy Continuum’ that helps assess and compare overarching oil business strategies in the face of the need for rapid decarbonization and the management of transition risks. In it, three distinct types of transition strategies are identified:
- A conservative ‘Core Business’ strategy where a company tries to maintain its position in global oil and energy markets
- A strategy of ‘radical transformation’ which entails a complete overhaul of the oil-centred strategy
- And a strategy of becoming an ‘integrated energy company’ (IEC) which entails a pivot away from a focus on producing gas and oil to offering a wider range of energy services.
Towards the horizon
All three strategies necessitate the development and deployment of dynamic capabilities and other company resources. So, faced with the pivotal moment and increasing pressure to set the compass towards a more sustainable future, it will be interesting to see which strategy, or combination of strategies, the IOC giants will choose, based on how they see the energy transition and how much they are willing to invest – a challenge in risky waters, or an opportunity towards plainer sailing?

Useful links:
- Link up with Michael Bradshaw and Mathieu Blondeel on LinkedIn
- Read a related article: Climate change: Can we be nudged to act?
- Discover Warwick Business School
- Apply for the Warwick Business school MBA or EMBA programme.
Learn more about the Council on Business & Society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
Member schools are all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
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- Keio Business School, Japan
- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.
