Meet the shrewdest operators in today’s oil markets
Almost a decade ago, a price war broke out between petrostates in the Persian Gulf and the frackers in America, whose innovative drilling techniques gave rise to the shale revolution. In December 2014 The Economist put a picture on its cover of both antagonists standing back to back, frowns on their faces and petrol pumps at the ready. It called the new economics of oil “Sheikhs v shale”. Missing from that picture were two companies that until then had been the biggest stalwarts of America’s oil industry, ExxonMobil and Chevron. Had they been pictured, the two crusty supermajors would probably be standing awkwardly on the sidelines, struggling to make sense of what was going on. At last, they are moving back to centre stage.
For much of the interim period the petrostates and the hardscrabble shale producers remained critical to this new oil order, though their tussle unfolded in strange ways. In 2016 the OPEC producers’ cartel joined forces with Russia to create OPEC+, which its autocratic masterminds hoped would let them control oil prices in order to benefit their regimes. Yet instead of responding by dousing the world in oil, the frackers unexpectedly developed OPEC-like self-restraint. Under pressure from investors to improve profits, they kept a tight rein on drilling activity even when crude surged above $100 a barrel.
That unusual discipline continued until 2023, when American producers awoke from their chaste slumber. Record shale output allowed America to extract more oil than any country in history, offsetting desperate efforts by OPEC+ to curtail production in order to prop up prices. According to S&P Global, a consultancy, America and Canada together pumped more oil and gas in 2023 than the whole of the Middle East. The bonanza spread to South America, where producers in Brazil and Guyana also drilled unprecedented amounts of oil. Daniel Yergin, an energy historian, calls it “the great…
2024-01-03 14:51:00
Source from www.economist.com
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