Two words dominate international business like no other: Big Oil. For over a century, the oil industry has dictated the way the world uses energy. From shipping and transportation to economics, the environment, and politics, Big Oil has shaped the modern world, and affected the lives of nearly everyone on the planet. Just a few decades ago, it was nearly impossible to think of a world without Big Oil, but thanks to recent advances in technology, increasingly strict environmental laws, and rising fuel economy standards, that world suddenly seems within reach.
At the turn of the 21st century, Big Oil reigned supreme just as it had for the previous 100 years, but things have changed quickly since then. Elon Musk and Tesla have shown the world that not only can electric cars be daily drivable, they can be sexy too. Musk’s new Tesla Powerpack home battery system could further disrupt oil-based energy by potentially storing enough solar power for homeowners to remove themselves from America’s aging power grid.
Toyota has spent over 20 years developing and testing hydrogen-powered cars, culminating in the 2015 Mirai, which runs on pure hydrogen and produces zero emissions. Mirai means “future” in Japanese, and the name is prescient enough for Mercedes-Benz to follow suit and offer a hydrogen-powered car of its own.
Audi is working on a diesel fuel sourced from water and carbon dioxide, cutting fossil fuels completely out of the mix. Today, nearly every major automaker from Kia to Ferrari offers hybrid or electric models, with more on the way thanks to stronger than expected sales and enticing government incentives.
These developments, plus stricter environmental laws (including recent restrictions placed on diesel-powered vehicles in Europe) have put Big Oil on notice. It may still be the biggest dog in the yard, but if technology keeps evolving at this rate, it won’t be for long. As a result, some companies feel that in order to remain successful, there’s only one way to go: upmarket.
Royal Dutch Shell is one of the largest oil companies in the world. With 45,000 fueling stations in 80 countries, it’s about as powerful and influential as oil companies can get. It recently flexed its muscle and took over Times Square in Manhattan on a rainy Tuesday to launch its latest premium gasoline called “V-Power NiTRO+” and preview what the company sees as the future of fossil fuels.
Speaking with The Cheat Sheet, István Kapitány, Shell’s Executive Vice President of Retail, said that he finds the sudden diversity in the energy market to be a good thing. “Everybody is under a bit of pressure, and that’s good because that drives the industry in the right direction,” he says. From August 2005 to August 2014, U.S. gasoline sales have slid 7.9%. Despite this overall decline, premium gasoline sales have grown 4.8% over the past two years – and Shell has a commanding 30% share of global premium sales. Looking at these numbers, Kapitány says “we see that this trend is unstoppable, we will see more premium, and in that segment we would like to be increasing our market share.”
So instead of creating a more affordable, lower-octane gasoline, Shell has decided to move upmarket with the highest-grade premium gasoline available in the U.S. market. But this is by no means an isolated move, as 40% of new cars are designed to run on premium fuel, and with global luxury car sales continuing to rise, this number will only increase.
What sets Shell’s new fuel apart is the level of additives and detergents designed to burn off 60% of engine deposits and keep engines clean, which Kapitány sees as a major innovation in fuel development. “This invention in fuel technology is not like mobile communication, it’s not a huge break. But you go step by step, just getting better and better. Like in racing, you have to keep working very hard to get those improvements.”
The fuel was developed in close consultation with the Scuderia Ferrari team, and Kapitány says that NiTRO+ “is around 99% made from the same compounds of the racing fuel used by Ferrari.” He sees this as a major selling point, and an important advantage to Shell’s influence in the premium market. ” because of our significant investment in our research and development, we are able to continuously improve our products. Many of our competitors in gas retail don’t have the capability to produce anything.”
So with Shell setting the agenda for the future of gasoline, will its competitors be far behind? As alternative fuels continue to gain market share, and environmental laws get stricter, the oil industry needs to evolve in order to survive. Looking at the future, Kapitány says, “We want to be a dealer in mobility in 50 years time. But the one thing that’s for sure is that the energy mix in the next 15-30 years is going to be a combination of different sources, and fossil fuels will play a roll.” Not only was that surprising to hear at an event for a new gasoline, but it’s the kind of thinking oil companies need to survive in the 21st century.