ALL PERSPECTIVES CAN'T BE RIGHT ON OIL, GAS PRICES

Bob Tippee
Editor

Three interesting perspectives on prices of oil and natural gas are crisscrossing through the news.

They are the political perspective, the oil company perspective, and the market perspective.

According to the political perspective, as expressed in the US Congress and much of the media, prices have risen for suspicious reasons and are destined to stay high, so companies should invest their profits—also suspiciously high—in refineries and alternative energy. The investments, by the way, need to occur even as lawmakers threaten to impose "windfall profit" taxes and otherwise demonize profits.

According to the oil company perspective, current oil prices won't last. They reached recent levels in a tight market further tightened by damage from two hurricanes. Belief that the oil price trading range has risen permanently needs to be tempered by the costly failures of past such expectations to come true. It's better, in this perspective, to immunize investment economics against the nastiest imaginable price surprises. And, by the way, the demagoguery now coming from Congress just adds to the already heavy political risk discouraging refining investment in the US.

The contrast between these two perspectives is striking.

One assumes prices are permanently (and suspiciously) high and proposes permanent responses—taxes, government-owned refineries, and so on. The other assumes prices are only temporarily high and can't shake the worry that they'll tumble again as much as they have before.

Both sides can't be right. Most likely, neither one is.

Oil prices—crude, gasoline, pick a product—can't stay in the economic stratosphere. Supply in a tight market suffered a major jolt. But it's recovering.

But oil prices almost certainly won't plumb the abyss into which they fell in 1998, either. Demand gains are firmly embedded in growth economies of Asia, especially China, and India. And pivotal exporters aren't likely to leave production at near-capacity levels if prices fall much below $50/bbl.

And, oh yes, there's that third perspective: the market. The near-month futures price for crude in New York fell to a 3-month low on Nov. 2, and the gas contract fell to a 2-month low. Gasoline prices are falling, too.

Online Nov. 4, 2005; author's e-mail: bobt@ogjonline.com

Related Articles

New regulator lists UKCS ‘priority actions’

02/25/2015 The UK’s Oil and Gas Authority, responding to calls from industry and the government for prompt support of UK Continental Shelf (UKCS) exploration ...

Grizzly files OSCA application with AER for Thickwood

02/25/2015

Grizzly Oil Sands ULC, Calgary, has filed an Oil Sands Conservation Act application with Alberta Energy Regulator for the Thickwood project.

BLM moving toward strategy for Greater Sage Grouse, Jewell says

02/25/2015 Calling it a remarkable example of federal, state, and local cooperation, US Sec. of the Interior Sally Jewell said the US Bureau of Land Managemen...

Hickenlooper’s siting task force calls for more local consultation

02/25/2015 Colorado Gov. John W. Hickenlooper’s (D) oil and gas siting taskforce called for more consultation and greater involvement with local communities o...

Santos-Inpex JV gains permits in Browse basin

02/25/2015 A joint venture of Santos Ltd. and Inpex Corp. has been awarded two exploration permits in the Browse basin offshore Western Australia, about 500 k...

Obama vetoes bill approving Keystone XL crude oil pipeline

02/25/2015 US President Barack Obama vetoed S. 1, authorizing construction of the proposed Keystone XL crude oil pipeline, saying that Congress had attempted ...

County decision in Washington state stalls Shell’s Bakken rail plans

02/24/2015 A Skagit County Hearing Examiner in Mount Vernon, Wash., halted Royal Dutch Shell PLC’s plans to move Bakken crude oil by rail to the company’s Ana...

Work stoppages commence at largest US refinery, three other facilities

02/23/2015 The United Steelworkers union (USW) has launched additional work stoppages at the largest refinery in the US and three other facilities as part of ...

AER sets new seismic monitoring rules for Duvernay in the Fox Creek area

02/23/2015 The Alberta Energy Regulator (AER) announced seismic monitoring and reporting requirements for companies using hydraulic fracturing in the Duvernay...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected