Low Prices, Full Storage Tanks: What's Next For The Oil Industry

Apr 30, 2020

At the end of the hour, we hear from Stephen Henderson, host of “Detroit Today,” about the loss of WDET listener and caller Tom Wilson


When the economy slows, so does the demand for oil. Prices have plummeted and storage tanks are filled to capacity. We look at the future of the oil industry.

Guests

Mitchell Ferman, economy and energy reporter for the Texas Tribune. (@MitchellFerman)

Meghan L. O’Sullivan, director of the Geopolitics of Energy project at Harvard University’s Kennedy School, where she also is a professor of the practice of international affairs. She was a special assistant to President George W. Bush and deputy national security advisor for Iraq and Afghanistan. (@OSullivanMeghan)

Philip Verleger, owner and president of PKVerleger LLC. (@pkverlegerllc)

John Bozeman, co-owner of Bracken Operating, LLC, a company that buys oil and gas wells from drillers. You can reach him at john@jcbcompanies.com.

From The Reading List

Bloomberg: “Covid-19 Oil Collapse Is Geopolitical Reset in Disguise” — “The world is on the cusp of a geopolitical reset. The global pandemic could well undermine international institutions, reinforce nationalism and spur de-globalization. But far-sighted leadership could also rekindle cooperation, glimmers of which appeared in the G-20’s offer of debt relief for some of the world’s poorest countries, a joint plea from more than 200 former national leaders for a more coordinated pandemic response and an unprecedented multinational pact to arrest the crash in oil markets.”


Local oil blog ‘Oily Stuff‘ reflects on the oil industry.


Texas Tribune: “Texas oil regulators take no action on production” — “The morning after oil prices crashed into negative territory, Texas oil regulators on Tuesday decided against taking action to impose limits on oil producers, instead creating a “task force” to gather more information on oil production cuts as the coronavirus has kept much of the world at home, crushing global demand.”

PK Verleger LLC: “Beyond Greed Redux” — “Forty years ago, the silver trading by the Hunt brothers, Bunker and Herbert, came close to bringing down the US financial system. Only the last-minute intervention by the Federal Reserve, led by Paul Volcker, prevented disaster. Stephen Fay recounted the debacle in a pot-boiling bestseller titled Beyond Greed.”

Financial Times: “Big Oil faces new reality where ‘everything has changed’” — “Gordon Ballard, head of the International Association of Oil & Gas Producers, has seen many downturns in his 38-year career. But they were all followed by recoveries. This time, he fears, things may be different.”

The Economist: “The future of the oil industry” — “Oil, it has been said, is the blood coursing through the veins of the world economy. In 2020 the economy is bleeding red. As covid-19 keeps workers at home and planes on the ground, demand for oil has fallen faster and further than at any point in its history. Amplifying the shock, a furious row between Saudi Arabia and Russia set off a price war in early March. Last month oil prices fell by more than half, leaving a giant industry reeling.”

Forbes: “How Big Oil’s COVID-19 Near-Death Experience May Be A Preview Of The Industry’s Ultimate Demise” — “Despite the new agreement on production cuts by OPEC+, Russia, Mexico and the G20, electricity is ultimately going to win the energy war. It was expected to happen over a series of battles that played out over decades, but over the last month, Big Oil has endured a fast-forward horror show of that future condensed into a few weeks unlike any other.”

Atlantic Council: “COVID-19 spells out new era for energy markets” — “On April 12, the United States joined Russia, the Organization of the Petroleum Exporting Countries (OPEC), and the cartel’s allies in a deal to cut 10 percent of the global oil production. The deal, however, has failed to lift energy markets, which had seen the rug pulled out underneath them by the COVID-19 pandemic, bottoming out energy prices and demand. A week later on April 20, oil prices continued to plummet due to strains on oil storage capacity, with US main benchmark West Texas Intermediate dropping 40 percent, down to $11 a barrel.”

Financial Times: “Tanker rates boom as oil refiners turn to floating storage” — “Refiners are scrambling to secure tankers to hold surplus jet fuel, diesel and petrol, as the collapse in demand stemming from the coronavirus outbreak leaves the world awash in oil and oil products.”

New York Times: “It Calls Itself the Energy Capital. Now It Faces 2 ‘Horrifying’ Crises.” — “On the same day that the price for U.S. crude oil fell to about $30 below zero — a mind-bending concept and the first time oil prices had ever turned negative — Mayor Sylvester Turner of Houston, the self-proclaimed energy capital of the world, stood before reporters. His words were grim and muffled by the black mask covering his face.”

Reuters: “Trump calls for U.S. oil industry bailout as prices plunge” — “U.S. President Donald Trump said on Tuesday he has asked his cabinet to devise a plan to inject cash into the ailing U.S. oil-drilling industry to help it survive a historic collapse in crude prices.”

Financial Times: “Will American shale oil rise again?” — “Asking Opec to help save the US oil sector was not part of Donald Trump’s vision of “American energy dominance”. The US president’s role in brokering a deal between Saudi Arabia and Russia to end a damaging price war was intended to prop up oil.”

E&E News: “Wind, solar cheapest power for 67% of world — report” — “New wind, solar and battery projects are getting so inexpensive that they rival the cost of building new gas or coal power plants in most of the world, according to a new report.”

This article was originally published on WBUR.org.

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