No. of Recommendations: 6
One thing that stands out to me in my career of working for a whole lot of different oil companies: none of them were ever able to predict the price of oil in long or short term. You would think that it would be a manageable supply-demand issue, and that the Exxons of the world would have a good insider's grasp, but the price has moved counter to their projections over and over.
That said, there are some factors in the current scene which differ from the past. We never expected oil demand to drop, but now there is a significant sentiment that oil use will, and must be, phased out. I'll refrain from offering my opinion, and just state that I think any phase out will take far longer than any of the goals being discussed. World energy demand is increasing at a rate which exceeds the total world energy currently produced by renewables. Those long term reserves will be money in the bank, and a good opportunity to deploy capital.
On the supply side, price is much more of a control knob than it once was. Fracking low grade deposits produces enormous productive capacity at high prices and very little at low prices. In the past, high prices resulted in bringing on new production which remained profitable at low prices once infrastructure was in place. High prices of the 1980's brought on a massive production boost from the North Sea. Those fields kept cranking through the low prices of the late 90's. The fracked oil being produced in large volumes in the US is very profitable at $80, decent at $50 and marginal at $30.
Let me know whether we are headed for a recession or not and how the war in Ukraine will turn out, and I'll let you know which price range we'll see.
As far as the OXY CO2 projects go, I'm not fond of it. China produces twice the CO2 of the US, so the world carbon budget will not see any effect of a few sequestration projects. The profitability of it all depends on what government subsidies or regulations are passed. I've never been a fan of making money in that universe, though I suppose it can work out well when done right.
