Happy New Year?

The fore­casts are grim, but the oil patch is rarely pre­dictable

Alberta Oil - - EDITOR’S LOG - NICK WIL­SON nwil­son@al­ber­taoil­magazine.com


the New Year with a new editor and likely a new era of tur­bu­lence in en­ergy prices.

There’s a joke that en­ergy an­a­lysts spend half their time pre­dict­ing what will hap­pen, and the other half ex­plain­ing why what they said would hap­pen, didn’t. To be fair, they live in a world of unknowns and un­know­ables, from wars and rev­o­lu­tions to weather and revo­lu­tion­ary tech­nolo­gies.

In my nearly two decades’ ex­pe­ri­ence as an oil and gas jour­nal­ist, I’ve learned that the only pre­dictable thing about oil prices is that they are un­pre­dictable.

I was liv­ing in Mex­ico in 1999 when the price of oil crashed to $10 a bar­rel, and The Econ­o­mist said at the time that if the Per­sian Gulf states boosted pro­duc­tion any fur­ther, it would hit $5 a bar­rel.

By 2005 I was work­ing in Dubai when some econ­o­mists claimed the sky-high oil price would tip the global econ­omy into re­ces­sion, trig­ger­ing an oil price col­lapse. Hur­ri­cane Ka­t­rina was rag­ing across the Gulf of Mex­ico and the record price that had them fright­ened was $70 a bar­rel.

In­stead, by 2008 the price had dou­bled and Gold­man Sachs an­a­lysts talked about $200 bar­rels within two years. (In 2015 the same bank said the price might drop to $20 a bar­rel in 2016).

At one OPEC con­fer­ence I ac­tu­ally saw the price of oil drop when the car­tel an­nounced it was cut­ting pro­duc­tion. Traders didn’t be­lieve OPEC mem­bers would stick to their quo­tas.

It’s not just prices that are hard to pre­dict. Ear­lier in the decade I read a mar­ket anal­y­sis re­search note about oil pro­duc­ing coun­tries in­flat­ing their re­serves fig­ures – it sar­cas­ti­cally said Canada had mas­sively boosted its re­serves by “re­nam­ing tar as oil,” and dis­missed Al­ber­tan crude as hav­ing no po­ten­tial im­pact on mar­kets.

As I watched Qatar build­ing the world’s largest LNG plants, no one knew that Doha would soon face two very dif­fer­ent kinds of rev­o­lu­tions: one in the Middle East and the other in North Amer­ica’s shales. One fu­eled the fear fac­tor, and the other made Qatar Pe­tro­leum and ExxonMo­bil pivot to ex­port LNG from their Texan ter­mi­nal, which was ini­tially built to im­port it.

Al­berta’s oil price for­tunes are, of course, tied to oil pipe­lines. And they aren’t prov­ing to be any more pre­dictable. There is fierce op­po­si­tion to ev­ery pipe­line pro­ject pro­posal in Canada right now, and the Keystone XL’s fate hangs on a U.S. pres­i­den­tial elec­tion – and worse still, on a Repub­li­can Party that can only be de­scribed as volatile at best.

In Al­berta, as a di­rec­tor of the Leduc #1 En­ergy Dis­cov­ery Cen­tre, I’ve learned from vet­eran oil­men and women how the as­tound­ing ex­per­tise, in­no­va­tion and cre­ativ­ity de­ployed in the prov­ince’s oil patch makes it so re­silient. They have lived through more booms and busts than I have. Th­ese veter­ans, and the slump-surf­ing ex­ec­u­tives fea­tured in our 2016 C-Suite En­ergy Ex­ec­u­tive Awards, rep­re­sent what’s great about Al­berta’s oil in­dus­try. As the editor of Canada’s best en­ergy mag­a­zine, I proudly carry Al­berta Oil’s torch into this New Year and into our ex­cit­ing fu­ture.

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