From Precision to Control: How Energy Leaders Win Under Uncertainty
A brutal truth
In energy, the biggest losses — and the biggest windfalls — come from the same place: uncertainty.
On West Texas Intermediate’s infamous crash day (April 20, 2020), oil futures went below $0. Most players froze. A few, with storage flexibility and fast decision loops, made a fortune.
Being “precisely wrong” can destroy billions. Being “mostly right” can build fortunes. As George E. P. Box put it: “All models are wrong, but some are useful.”
Why “precisely wrong” keeps happening
The root cause is deterministic thinking: the habit of planning around a single forecast as if the world will unfold that way. It feels rigorous. But it bakes in bias, blinds you to tail risks, and locks you into fragile strategies.
Real life is probabilistic. Markets, policies, and supply chains evolve unpredictably. A single snapshot of the world will almost always be wrong — often precisely wrong.
See the range, not the point
You don’t need perfect P10/P50/P90 distributions to be useful. Start with something as simple as min / most likely / max. This instantly reframes the conversation:
- Which outcomes carry most of the value?
- Where is the downside concentrated?
- How wide is the spread between risk and reward?
That’s when better trade-offs emerge:
- One option might show higher expected NPV but huge downside.
- Another might offer lower NPV but far less downside exposure.
Without a range, you can’t see this shape — and can’t make risk-informed choices.
When to use scenarios — and when they fall short
Scenario analysis is powerful for exploring structural shifts (policy push vs rollback, demand surge vs stagnation). But for choosing between capital options, it’s not enough. You need probabilistic thinking to compare risk-adjusted outcomes and understand which choice actually fits your risk appetite.
At Enerquill, we’ve built a tool that helps leaders run these probabilistic assessments simply and transparently — turning ranges into actionable risk–return insights. See demo link here
Ranges unlock mitigation thinking
As soon as people see a range, discussion naturally shifts from “the forecast” to:
- “What if the downside hits?”
- “How do we survive it?”
- “What do we do if the upside comes?”
That’s where real value is created — not in chasing forecast accuracy, but in making the most optimal decision under uncertainty, designing robust mitigation plans, and deliberately keeping optionality alive.
Build full-spectrum mitigation
Mitigation must go beyond isolated fixes. It should combine technical and commercial levers to protect downside and capture upside:
- Technical: redundancy, modularity, weatherization, fast-ramping capacity
- Commercial: hedging, flexible contracts, diversified offtake
- Hybrid: pre-investing to enable rapid scale-up, bundling products, dual-market or dual-fuel strategies
These hybrid solutions not only reduce losses — they embed real options that can be exercised when upside appears.
The bottom line
Forecasts will always be wrong. But leaders who are mostly right — by seeing the range, comparing risk–reward, and focusing resources on mitigation and optionality rather than false precision — will consistently outperform those who build fragile plans on deterministic dreams.
Optionality beats precision. Resilience beats fragility.
