Santos boss David Knox reckons there is nothing unusual about the recent price slump saying on Friday that: “The reduction in the oil price always seems to come as a surprise, and this time is not particularly different.”

Really!

Knox obviously has a different type of crystal ball to that used by Michael Hintze who reckons the oil price could stay low for a decade because of a structural shift in the dynamics of the oil market which means a “major change to the value-chain is taking place”

They can’t both be right yet the two men are probably looking at the same data only to arrive at different conclusions, a result best explained by the positions they occupy or the quality of the crystal balls on their desks.

Knox’s forecasting tool, presumably the best available in his home town of Adelaide, almost certainly has an optimistic tinge to it because that’s the way it was made, or because for the Santos boss to turn pessimistic could be the kiss of death for the company he leads.

Sir Michael’s crystal ball has been manufactured in London where, as one of the richest UK resident Aussies, he also ranks as king of Europe’s hedge funds (and Australia’s 23rd richest person according to BRW magazine) with his CQS fund rated as one of the world’s top performing investments.

The differing views of two Australian captains of industry are one of the better examples of the unchartered waters into which the oil industry is sailing, and while The Slug would like to accept the views of Knox he reckons Sir Michael is seeing the future more clearly.

Certainly the evidence of the past few weeks indicates that most big oil producers, and the consultants who service those companies are retreating into their respective castles, raising the drawbridge and flooding the moat for a prolonged oil-price siege.

Schlumberger’s sacking of 9000 workers is one of the more dramatic developments, but will not be the last of the wholesale workforce culls as management takes a look at a future of reduced cash flows, marginal profits and pressure from banks to justify existing credit facilities.

Royal Dutch Shell’s decision, with its Qatari partner, to mothball the planned $6.5 billion Al Karaana petrochemical project is another example with Shell admitting that the financial numbers no longer add up, or to use Shell’s precise words “high capital costs have rendered it commercially unfeasible”

Right across the oil sector there is the sound of project plugs being pulled and once sacred cows being sacrificed. Premier Oil has ditched, for now, its Sea Lion project off the Falklands and Norway’s Statoil has handed back three exploration licences covering remote waters off western Greenland.

It is against the mounting evidence of toughening times, and an oil price which remains below $US50 a barrel, that the crystal ball of Sir Michael is showing scenes of a long and bleak winter with low oil prices likely for years, and perhaps the decade he can see.

So, if Sir Michael’s crystal ball is providing such a clear (albeit disturbing) future why does Knox see a situation which he virtually called a normal, cyclical, correction which will soon pass.

There is only one reason for Knox doing that. He has to.

To do otherwise would expose Santos to even closer scrutiny and possibly more devastating criticism such as the “worthless” tag applied by Credit Suisse, an extreme view based on the highly unlikely possibility of oil prices remaining as low as they currently are – forever!

Knox was quick to dismiss the Credit Suisse view as “nonsensical” but he also acknowledged that “things had got out of control”, a dangerous situation for an oil company with a poor record of dealing with its critics.

The next few months will be crucial for the whole oil industry, and potentially perilous for Santos as it moves towards completion of its flagship LNG project in Queensland, and analysts start to speculate on when (not if) the oil-price crash will flow into LNG prices.

From where The Slug sits, the potential for a major LNG price correction as oil-pegged contracts are rolled is an issue which should have everyone in Australia watching very closely because of existing LNG production, and the imminent start-up of new projects.

Knox, and other local industry leaders, might believe that LNG is a special case and will ride out the current oil-price downturn but, if people such as Sir Michael are right and the downturn rumbles on for years, projected profits from LNG production will be in doubt.