30 Apr Lessons Learned
Oil vs Nat Gas…What’s Going On?!
There has been a lot of pressure put on the current state and federal governmental administrations on the oil and gas industry to “hurry and produce” to help relieve retail prices on both. It seems like everyone is suddenly realizing our infrastructure (and economy in general) is heavily reliant on product, especially politicians and bureaucrats that have been passing detrimental legislation or policy.
I’ve been watching not just market prices, but also reporting on transport and storage. We’re seeing minimal increases in raw and refined product over the past month (if not less).
Let me tell you something…our industry is in no rush to produce a lot product.
Here’s Why
• Historical Market Crashes – Due to domestic over-production, self-imposed embargos on exports, and OPEC+ dumping product on the market, we’ve had crashes that have devastated jobs and companies throughout the industry. It’s been “par for the course” for many decades. Remember in April 2020 when oil was -$37 for a single day? We do! We can also site the 80’s crash, 2014, Russia, etc. that have kicked our butts recently.
• “Trust the Government”? – Changing regimes or political winds is subject to massive volatility to explore or produce on any governmental leases. Today’s beggars are tomorrow’s stealers.
• Funding – Banks started closing up shop on funding oil programs starting back in 2012 but went full court press in 2014, when institutional funds were desperately needed. Smaller companies have been reliant on mostly private raises since (the ones I work with). Larger public companies have other options due to public stock prices (putting reserves on books).
There are some mitigating factors that prevent rapid production increases as well today. Equipment shortages, steel prices, and let’s not forget refineries can only push so much out…
In short, the large domestic producers appear to have figured out that being first to the tanks when prices are high is not good for long-term stability nor gains. No one wants to lay off employees if they don’t have to…
A stable oil and gas market is a pillar of a stable America.