Business Editor Adam Wilmoth and energy reporter Jack Money fielded questions during The Oklahoman’s monthly online energy chat on Tuesday. This is an edited transcript of that conversation. To see the full transcript, go to NewsOK.com.
Q. Why do Trump’s tweets have so much power to affect oil prices?
Wilmoth: The president can back his tweets with sanctions, tariffs and other actions. It’s unclear what he will do. More than that, the market doesn’t like uncertainty. Historically, oil prices often have bounced on threats and saber rattling, regardless of whether action was taken.
Q. Does cheap oil and gas slow down advances in alternative energy sources?
Money: Absolutely. I’m not going to spend thousands to retrofit my vehicle to run on an alternative fuel unless I think I can make a return on that investment. I’d look at it the same way if I were thinking about buying an electric vehicle.
Q. Will oil prices rebound from this drastic fall?
Wilmoth: Oil prices are notoriously volatile. Prices went up in part because of expectation that U.S. sanctions on Iran would slow global production, and fell after the Trump Administration gave exceptions to many of Iran’s largest buyers. I don’t know much has changed on actual global supply and demand fundamentals. It looks like much of the price changes the past few weeks has been based on speculation.
Q. Why would OPEC cut production when the U.S. will just crank up production to fill the void?
Money: The Saudis are producing from mature fields where the oil has a high sulfur content (the kind our refineries are designed to use to make gasoline). In the U.S., oil growth comes from shale plays where the oil has a low sulfur content. We are exporting it onto the global market, but because refineries here (and many overseas) depend on that heavy oil to run, a Saudi cut can impact global prices, even with our increased exports.
Wilmoth: There also are questions about how much Saudi Arabia can increase production. Saudis say they have excess capacity, but that’s questioned by many analysts and observers.
Q. Will the 20 percent drop in oil prices slow down drilling in the state or will drilling continue as planned?
Money: Companies are still drilling and completing using 2018 budgets, for the most part. If the price stays where it is at now or continues to fall, I think you’ll begin really seeing an impact in 2019.
Q. It seems mergers and acquisitions are sort of back in vogue. What’s your crystal ball telling you for next moves?
Money: Companies that have capital and are looking to get more oil into their production mixes are on the hunt, for sure. SandRidge continues to look. Chesapeake already has made a move. I wouldn’t be surprised to see more.
Q. Are there other places in the world that have shale oil just waiting to be tapped but for some reason or another, it isn’t?
Wilmoth: Much of the world has shale, but few places have resources available to produce it. The main factors supporting U.S. shale production are private mineral ownership and access to experienced services companies. Shale is labor intensive. It requires access to water, sand, chemicals, drillers, frackers and many other specialized services. It also requires access to pipelines, storage facilities and processing plants.
Those resources are not available in much of the world, at least not to the extent they are in the United States.
Q. What’s your forecast on SandRidge continuing to occupy its space downtown, and what alternatives would there be if SandRidge left that space?
Money: Any number of scenarios could unfold, both for the company and for the property. It already has sold off a couple of significant pieces of its downtown campus, one of which was bought by Echo Energy, which is moving downtown from northwest Oklahoma City into the Parkside Building. Earlier, SandRidge sold the Braniff Building to the owner of a Duncan mineral royalties firm.
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