CXO Scenario Planner

How Shell Used Scenario Planning to Survive the Oil Crisis

Published: 17 March 2026

In the early 1970s, Royal Dutch Shell was the seventh-largest oil company in the world. By the end of the decade, it had risen to second place. The secret was not a new oil field or a breakthrough technology. It was a small team of planners who dared to imagine futures that most executives dismissed as impossible.

Pierre Wack and the Birth of Shell's Scenario Team

In 1965, Shell established a Group Planning department in London. By the early 1970s, a French planner named Pierre Wack had taken the lead on a new approach: instead of producing single-point forecasts, the team would develop multiple, internally consistent stories about how the future might unfold. Wack called them "scenarios" and insisted they were not predictions. They were rehearsals for the mind.

Wack's method was grounded in a simple observation: traditional forecasting fails precisely when you need it most. Forecasts extrapolate from the recent past, and they break down at the very moments of discontinuity when executives most need guidance. Scenarios, by contrast, are designed to illuminate those discontinuities before they arrive.

Anticipating the 1973 OPEC Embargo

By 1971, Wack's team had identified a set of structural forces that most oil executives were ignoring. OPEC nations were gaining confidence. Libya had already shown that individual producers could restrict supply to raise prices. The United States was becoming a net oil importer for the first time. The arithmetic was clear: demand was rising, spare capacity was shrinking, and the balance of power was shifting toward the producers.

The team constructed scenarios in which OPEC nations would use oil as a political and economic weapon. In one scenario, a Middle East conflict triggered an embargo. Prices doubled, then tripled. The global economy stumbled into recession. Most of Shell's senior managers found the scenario uncomfortable but could not dismiss the logic that underpinned it.

When the Yom Kippur War broke out in October 1973 and OPEC imposed its embargo, Shell was the only major oil company that had already rehearsed its response. While competitors scrambled, Shell's managers drew on the mental maps they had built during the scenario exercises. They adjusted refinery operations, renegotiated contracts, and repositioned investments faster than any rival.

From Number Seven to Number Two

The payoff was enormous. Shell's preparedness during the 1973 crisis gave it a lasting competitive advantage. The company made faster, bolder decisions about exploration, refining capacity, and diversification. By the late 1970s, Shell had climbed from seventh to second among the world's oil majors, a position it maintained for decades.

But the scenario team did not stop there. In the 1980s, they explored futures in which the Soviet Union collapsed, years before the Berlin Wall fell. When Iraq invaded Kuwait in 1990, Shell had once again rehearsed the possibility and its implications for oil supply. Time after time, the discipline of scenario thinking allowed Shell to act while competitors were still reacting.

Why the Shell Story Still Matters

The Shell case is not just a history lesson. It demonstrates three principles that remain powerful today:

• Scenarios change the quality of decisions, not the accuracy of predictions. Wack never claimed to predict the embargo. He gave decision-makers a richer mental model so they could recognise the early signals and respond with plans they had already thought through.
• The value lies in the process, not the document. The real output of a scenario exercise is not a report. It is a leadership team that has debated, disagreed, and ultimately aligned on how to act under different conditions. That shared understanding is what allows fast decisions under pressure.
• Discomfort is a feature, not a bug. The scenarios that matter most are the ones executives would rather not think about. Wack deliberately pushed Shell's managers to confront uncomfortable possibilities. That willingness to sit with uncertainty is what separated Shell from its competitors.

Lessons for Modern Leaders

Today's leaders face a landscape arguably more volatile than the 1970s. Geopolitical realignment, AI disruption, climate regulation, and demographic shifts are creating the same kind of structural discontinuities that Wack identified half a century ago. The question is not whether surprise is coming, but whether your organisation has rehearsed its response.

The challenge is that traditional scenario planning is slow and expensive. A full exercise can take weeks of executive time and hundreds of thousands in consulting fees. Most organisations simply cannot afford to run one, which means they fall back on the single-point forecasts that fail at the worst possible moment.