Evaluating the future while learning from past mistakes
Thomas Petrie's new book, Following Oil, published by the University of Oklahoma Press, offers substantive insight into the petroleum industry based on the author's more than four decades of experience as a banking executive, oil and gas analyst, and industry advisor. During his career, Petrie has advised on more than $200 billion of energy-related M&A transactions.
In Following Oil, Petrie shares his thoughts on historic events from the rise of the Organization of Petroleum Exporting Countries (OPEC) to the current oil and gas renaissance in North America that he attributes to "technological advances" that enabled the economic development of the continent's vast unconventional resources. This has allowed the United States to reduce its dependency on oil imports and to start thinking about energy independence.
Asked what lessons are to be learned from his book, Petrie noted five that have broad applicability to energy:
- Markets continuously endeavor to work, but do so in their own time and at their own pace.
- Flawed economic and policy incentives ultimately cause or at least exacerbate supply shortfalls (or sometimes undesirable surpluses).
- Powerful regenerative economic forces can result from application of well-incentivized capital focused on high-priority societal problems or needs.
- Periodic consolidation and reorganization (via mergers and sales) are integral to the evolving natural order of the petroleum sector economy.
- Shifting global macro-economic drivers can overwhelm even a well-executed plan, thus necessitating midcourse adjustments.
As to the future of energy, Petrie notes, "We have learned much from our past mistakes and are now capitalizing on recent technological advances. Also, if used effectively, natural gas can provide a much-needed multi-decade transition to [new energy sources]. In sum, we have much improved optionality for meeting our upcoming energy needs."
