The global oil and natural gas industry is beginning its long-awaited recovery, but crude oil prices likely will remain in the “$50 orbit” during the third quarter, energy expert Daniel Yergin said Monday.
The IHS Inc. vice chairman who often hobnobs with world energy leaders, shared the stage with Canada Natural Resources Minister Jim Carr at the Canada 2020 event in Ottawa.
“Our view is that the recovery has begun in the oil markets,” Yergin said of IHS research. The past two years proved that “price is really powerful. It has lowered the amount of supply coming in and increased demand.” If a minimum $50/bbl price is sustained until September, it would signal “kind of in the beginning of a recovery” after falling from highs near $100/bbl in the second half of 2014.
Yergin said the world’s energy powers view oil and gas differently than only a few years ago. He recently returned from a trip to the Middle East, including Saudi Arabia, which is undergoing an evolution toward less dependence on oil. The meeting earlier this month of members of the Organization of the Petroleum Exporting Countries (OPEC) was not an “obit for OPEC,” rather it “restored the credibility” as a new secretary general took over (see Shale Daily, May 9). OPEC is continuing to let the markets balance prices.
“What is striking is the change in thinking in the region,” Yergin said. “It’s reflected in this vast reform program in Saudi Arabia,” led by the 30-year-old crown prince. He saw it in other Middle Eastern countries as well, many of which are moving to diversify their economies beyond dependence on oil and gas sales.
“Now the grandchildren are in charge, and they want to monetize the oil, diversify it,” he said. “Partly it’s a question about more competition, but the other thing is what happens when you budget at $100/bbl and it’s $40 or $50 and you’ve got all these commitments. They were making their economies more resilient, more diversified..mixing of the old and the new.”
For example, he noted that Saudi Arabia’s Public Investment Fund recently invested in U.S.-based Uber, the car-booking app to generate growth and aid transportation sectors, which in turn would help the oil-dependent economy.
Geopolitically, the Middle East remains “quite turbulent,” which is not reflected in the oil price because of the abundant supplies. However, global markets are becoming more competitive, and it’s not only the oil producers competing with each other “but it’s natural gas, electricity, renewables, electric cars…they all are competing in each other’s territory.”
North America’s supple oil and gas resources are a “really important development,” which has strengthen the United States, Canada and Mexico.
“Although there have been some glitches in the U.S.-Canadian energy relationship in recent years, overall it’s been quite positive,” Yergin said.
“In general, it’s quite remarkable…That’s important…What I’m struck by is how integrated the economies are…” For instance, U.S. gas exports to Mexico have given the country “less expensive energy…As integration proceeds, it is very beneficial…”
IHS scenarios for North America oil and gas are divided into rivalries between the United States and Canada continuing, an “intensification” of the competition, as it is today, or autonomy. In the autonomy scenario, IHS foresees “a lot more distributed energy,” and by 2040, 25% of the automobile market is electric.
Wind and solar energy “were born in the 1970s,” but only in the last few years have they become more competitive with oil and gas, he said. Shale gas “began in the early 1980s,” and by 2004, there were substantial breakthroughs. Are there more to come?
“I’m pretty sure there are people working on things today that we don’t see, that will be a surprise.” One possibility is carbon capture and storage, still in early stages, expensive and complex. The issue is, how to get it to scale?
“We need a new industry called ‘big carbon,'” Yergin said. “We are really getting good at some of the things we are working on and other ways to capture carbon,” noting that ExxonMobil Corp. recently announced it is working with Fuel Cell Energy Inc. to link carbon capture at power plants to fuel cells (see Daily GPI, May 6).
In all things energy-related, the most important breakthroughs are related to lower costs, Yergin said. Companies now have “cheap oil,” but they “still talk about lower costs. That’s much more of a fundamental focus…They used to chase barrels. Now they chase efficiency.”
Davy on Sat, 11th Jun 2016 3:19 pm
The fact that we have people overly concern about their winning the race to say we humans are screwed is sad. Self advancement among our researchers is an illness of our times.
onlooker on Sat, 11th Jun 2016 4:08 pm
Mr. Yergin the whore for the Oil industry. Take his comments with the caveat that he has a conflict of interest in whatever he utters about this Industry.
Boat on Sat, 11th Jun 2016 5:10 pm
PracticalMaina on Fri, 10th Jun 2016 2:59 pm
Gotta have that bottom tier, make people feel superior for the tax money they generate with their useless consumption based jobs. The lowest tier gets harassed while trying to use their EBT card at the wali world. Fat lazy pricks complaining about someone on welfare while shopping at a store that has acted as a conduit for manufacturing to go to China and small retail to be run out of town. But, of course blame the poor prick, not the Waltons.
Enter Walmart and every box store that delivers products more efficiently with less energy. Next enter online shopping that is killing the box stores. Catch the theme? The more infrastructure it takes to deliver products the higher the cost. There is no blame here. Just the evolution of eliminating waste and cost. Stop with all the emotion and blame.
GregT on Sat, 11th Jun 2016 5:39 pm
“Enter Walmart and every box store that delivers products more efficiently with less energy. Next enter online shopping that is killing the box stores. Catch the theme? ”
Mass unemployment, a decimated middle class, economic malaise, societal unrest, and mountains of un-repayable debt. Hard not to ‘catch the theme’. More of what we are already witnessing.
onlooker on Sat, 11th Jun 2016 5:42 pm
Yeah Greg, the theme is the Corporations are blood sucking Vampires trying to extract every last bit of profit from the masses and the local communities that they can. Of course they are discovering that it is tough to sell anything when everyone is broke.
makati1 on Sat, 11th Jun 2016 7:44 pm
Even Henry Ford knew he had to pay his employees enough to buy his cars or he would not be able to sell them. You don’t buy a new car on minimum wage … unless you can fog a mirror and take out a 7+ year loan at zero interest and then dump it when you can no longer make the payments, like is happening today. Wall Street is buying another year or so before the car bubble pops. House bubble, etc.
So many bubbles today. So little intelligence.
Boat on Sat, 11th Jun 2016 8:53 pm
greggiet,
“Mass unemployment, a decimated middle class, economic malaise, societal unrest, and mountains of un-repayable debt. Hard not to ‘catch the theme’. More of what we are already witnessing.”
The US has gone from 10 percent unemployment to less than 5 since the crash. This is in spite of over adding over 1 million immigrants per year. You have supported immigration. You like high unemployment? 35 million Canadians, 40 million US foreign born immigrants. You and onlooker seem disconnected from obvious reality.
GregT on Sat, 11th Jun 2016 9:23 pm
If Obama tells you so, it must be true. Right Boat. Vote for Hillary and the TPP!
https://www.youtube.com/watch?v=ziwYbVx_-qg&feature=youtu.be
Oh, and Boat, you are obviously completely oblivious to reality. Onlooker is intelligent. You are not.
Boat on Sat, 11th Jun 2016 10:20 pm
I will vote for Hillary. Democracy has never been good at providing good candidates. Like you they they push ideologies and outdated groupthink.
Boat on Sat, 11th Jun 2016 10:22 pm
PS Am no Obama fan. Am no Democrat or Republican.
makati1 on Sat, 11th Jun 2016 10:26 pm
Ah yes, vote for the war mongering, lying, cheating, Wall Street whore, named Killery. Then you can harvest those mushrooms that will be sprouting all over American cities before the next ‘election’ cycle begins. Wait and see.
GregT on Sun, 12th Jun 2016 12:14 am
A citizenry always gets the government that it collectively deserves.
GregT on Sun, 12th Jun 2016 1:02 am
Democracy 101.
makati1 on Sun, 12th Jun 2016 1:29 am
Greg, that has always been the case throughout history and is especially true now. The elite are still relatively few in number, but there is no interest in rocking the boat and taking their heads like in the French Revolution.
The government of the Us has bought off the citizens with bread and circus’ and destroyed the education system to keep them ignorant. I read a stat that less than 40% of Americans can read above an 8th grade level. And even less can comprehend and use what they read because they were never taught how to think rationally. Language has turned into trash. Entertainment is porn, money and / or war themes. Corruption is in all levels of government. And on and on.
Yes, the US deserves what is coming and it ain’t gonna be pretty or fun. Blow-back is a bitch.