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Permalink Reply by Jack Straw on May 31, 2012 at 6:14am

The Oil & Gas industry has a long history of being cyclical - Boom & Bust.

I would argue that there will continue to be a cyclical nature to commodity pricing; particularly for Natural Gas (NG), less so for Natural Gas Liquids (NGLs) and even less for Oil.

We are currently heading towards what I would expect to be the low end of prices for NG, as the rapid ramping up of supply has exceeded available demand. However, NG is currently displacing other forms of energy (in an accelerating fashion) to the benefit of the regional economy and the pocketbooks of our citizens. The attractive environmentally friendly nature of NG greatly adds to its allure. I expect that the supply/demand equation will come to be in better balance through time, as the economy adjusts to the availability of this plentiful new source of unconventional NG.

Likewise, I believe that we are currently towards the low end of prices for NGLs; again, as the rapid ramping up of supply exceeds current demand. NGLs are the feedstock for many of the products that surround us in our daily lives; products that we have become dependent upon. The NGLs produced from these unconventional sources will result in resurgence of regional industry as a dependable supply of cheap NGLs will allow for a new global competitiveness. We will soon be making items that our economy depends upon, rather than importing those items.

With respect to the Oil component, Oil is priced globally. Oil will not be priced cheaply, but locally produced oil will displace the import of foreign oil – an advantage to all of America.

 

The best part of this evolving situation is the reality that the Marcellus and Utica are “blanket” deposits; their vast areal extent will likely result in it taking something of the order of forty years to fully exploit. The cyclical nature of the industry will likely remain, but the extent of the resource should temper the degree of the cyclical swings. This is not a short term “shot in the arm”, we should be looking at a situation that will have long term benefits to the region (and those who enjoy life in the region).

 

All IMHO,

                   JS

 

 

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