Popular oil

Frackers remain on path to dominate global markets, but the 21st century poses challenges.

If the geopolitics of oil and gas were remade as a clichéd teen comedy, this would be the scene where the former wallflower gets invited to the prom by the star athlete.

Saudi Arabia wants to invest in U.S. LNG.

Aramco, the Saudi state-owned oil company, has begun talks about buying a stake in Houston-based liquefied natural gas exporter Tellurian Inc., The Wall Street Journal reported last month.

The Saudis have dominated global oil for decades from their perch atop OPEC, the international oil cartel. Domestic producers were brought to their knees in 2014 when OPEC flooded global markets in an attempt to put frackers out of business. Their resilience and ingenuity, and plentiful storage capacity, demonstrated to the world that fracked shale can stay in play even when crude hits the floor.

The Permian Basin oil and gas region has particularly caught the eye of the Saudis.

This follows on reports that U.S. Energy Secretary Rick Perry spoke with Prince Mohammed about U.S. LNG exports during a recent visit to the Middle East nation. Abu Dhabi’s sovereign fund, Mubadala, also made a small investment in U.S. shale last year.

Industry experts think that the Middle East oil giants want a better understanding of how our nimble fracking systems work in contrast to the multi-decade investments that have been the traditional Saudi production method. Saudis might also be interested in importing LNG for heating and power, which would free up more of their crude for export.

Crude prices currently hover around $60 a barrel. U.S. production is flirting with record highs. And we’re the belle of the oil and gas ball.

If you’re looking for a happy ending, this is where you’d roll the credits. But there’s just one problem with those clichéd teen comedies. Life goes on after high school, and anyone who peaks in their teen years is going to be in for a rough time.

Looking at decades-long trends, it’s hard to be an eternal optimist about Houston’s oil and gas economy in the 21st century.

Renewable energy is becoming increasingly cost competitive. Electric vehicles are predicted to become a significant part of transportation, and nations like Britain, France and China are floating plans to prohibit internal combustion vehicles.

This shift away from oil and gas as the key fuel source for cars, trucks or the electric grid has plenty of frackers pinning their hopes on plastics and petrochemicals as a long-term consumer of petroleum. That might not be a sure bet. The bioplastics industry, which makes plastic from sugar cane, wood and corn, is estimated to grow at least 50 percent over the next five years, Bloomberg News reported this week. Companies like Coca-Cola and Lego are looking to plant-based materials, instead of those made from fossil fuels, to feed their supply lines. The environmental impact of plastic has corporations and consumers looking to a greener alternative that can be designed to naturally biodegrade over time.

Environmental pressure also has institutional investors unloading industries that emit greenhouses gases.

At the end of last year, New York announced plans to divest its state retirement fund from fossil fuels. The $200 billion fund has listed holdings in more than 50 oil and gas companies, including $1 billion in ExxonMobil. New York City’s comptroller announced a similar plan for its pensions, which total around $190 billion.

Norway has begun dumping fossil fuels from its massive sovereign wealth fund. Dozens of Catholic organizations have announced plans to do the same. And in December, the World Bank said it would cease lending money for oil and gas exploration.

Fracking sites have the flexibility to meet the immediate demand of a dynamic global market. They also have a lifespan of about two years. A city like Houston needs to think in terms of decades and centuries, and that means recognizing the limits to long-term growth in the oil and gas core of our economy. Houston could very well become a 21st century Rust Belt city if we fail to prepare for major changes in the energy sector. There’s no guarantee of a happy ending in this. After all, real life isn’t like a Hollywood movie.

Crude prices currently hover around $60 a barrel.