HGS Luncheon featuring Art Berman and his consulting perspective on global oil and markets.
Wednesday, January 24
The Petroleum Club of Houston
1201 Louisiana Street, 35th floor, Houston, TX
- If you valet park we can give you a discount coupon
Social 11:15 AM, Luncheon 11:30 AM- 1:00 PM
Cost: $50 pre-registered members; $60 for non-members/ALL walk-ups; $50 for Emeritus/Life/Honorary. Students: email office@hgs.org if you want to attend.
To guarantee a seat, you must pre-register on the HGS website and pre-pay with a credit card. You may walk up and pay at the door if extra seats are available. Please cancel by phone or email within 24 hours before the event for a refund. Online & pre-registration closes Wednesday, January 24 at 5:00 AM
"Don't Be Fooled by Lower Oil Prices or Alarmed About Forecasts For Higher Prices"
Speaker: Art Berman, Labyrinth Consulting
2023 was a year of failed memes about much higher oil prices. The China demand-rebound meme flopped by June, and the supply-deficit meme cratered in November. Now, most analysts expect relatively low prices in 2024 because of a supply surplus.
How did smart people get things so wrong? Partly by believing memes instead of asking how these could be wrong. I believe that the world is and will be in a secular period of relative oil supply urgency for much of the next decade. That will be modulated by a weak global economy.
The result should be price-cycling as the two opposing forces gain and lose investor and trader attention. James Galbraith described a phenomenon that he called “the choke-chain effect” in which scarce resources in a financialized market lead to the cycling of both oil prices and capital availability.
Price cycling and its associated price volatility create market anxiety and unwillingness to invest in new supply. Once this kind of price cycling is established, it is likely to persist until some new technology emerges—like shale in the 2010s—or an economic slump reduces demand. Some investors are betting that renewable energy is this new technology. I wouldn’t count on it.
Permian well performance has dropped 30 to 50% over the last few years as the play has been over-drilled. Production is still increasing but when this change becomes evident to markets, supply urgency will strengthen. At the same time, it seems unlikely that the world economy will improve much so the same dialectic seen at present will probably persist until some fundamental structural change occurs in the market.
Arthur E. Berman is a petroleum geologist with 36 years of oil and gas industry experience. He is an expert on U.S. shale plays, and has published more than 100 articles on oil and gas plays and trends. He has been interviewed about oil and gas topics on CBC, CBS, CNBC, CNN, Platt’s Energy Week, BNN, Bloomberg, Platt’s, The Financial Times, The Wall Street Journal, Rolling Stone and The New York Times.
