Big Oil has turned bearish on the future of its main product

For a century, there’s been a key metric for judging the direction of the oil industry: The number of years it would take for wells to run dry. The reserves-to-production ratio (R/P)—calculated as oil reserves, divided by annual production—has remained at eerily consistent levels since John D. Rockefeller’s day. At major oil companies, and in the US as a whole, it has rarely dropped below 10, and those moments have been associated with major disruptions.

Perfect 10: When America’s R/P slipped below the critical level in the late 1960s, it came amid fears that the country might be approaching ‘peak oil’, heralding the heady geopolitics of the 1970s oil crises. When Royal Dutch Shell’s R/P fell below 10 in 2004 due to a reserves write-down, the event was a major scandal, prompting the departure of a string of top executives and the payment of nearly half a billion dollars to aggrieved shareholders.

Now, Big Oil is running down its tank again. That’s an indication that when executives say oil demand may have peaked and the world is transitioning fast to renewables, it’s more than just words.