Happy New Year?
The forecasts are grim, but the oil patch is rarely predictable
HERE AT ALBERTA OIL, WE’RE ENTERING
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.