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Musings From the Oil Patch – February 6, 2018

This time is different.  Those four words have cost investors, corporations and governments untold sums over the years.  Right now, oil and gas industry strategy is being driven by the mantra of “capital discipline.”  A recent industry survey points to interesting trends about the industry with ominous implications for the future of the business.  The industry structure is shifting with large companies increasingly driving activity.  They are shifting their focus to reflect long-term positive trends for natural gas and renewables.  Will the market reward those moves or urge embracing “animal spirits” one more time to drive activity?  The world is supposed to be saved by the Millennials given their attitudes toward EVs, AVs and ride-hailing services.  An MIT economist involved in that institution’s transportation mobility research suggests none of these beliefs is true.  January was good for crude oil and bad for natural gas prices.  Will the “January effect,” associated with the remainder of the year’s stock market performance have any parallel impact in commodity markets?

 

A new survey of auto execs claims they overwhelming believe battery electric vehicles will fail commercially.  They believe hybrid and fuel cell technologies are the paths to a cleaner transportation market. Their comments about different issues with EVs and AVs offer sobering thoughts about the conventional view.  California’s governor dreams “big” about the future of zero emission vehicles in his state.  His goal of five million ZEVs by 2030 implies a 40% ZEV sales rate in 12 years, up from 5% now.  Another big budget expenditure for the state’s residents to fund.  Canada’s oil and gas industry is in the middle of another political brawl between British Columbia and Alberta, with the Canadian federal government playing a role, too.  Its outcome will shape the industry’s future, and interestingly, government revenues for the future.

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