Displaying items by tag: fracking
Elizabeth Warren’s ascendency to being the leading candidate for the Democratic presidential bid, coupled with her strongly leftist policies, has begun spooking various sectors. Energy is ground zero. The reason why is a tweet recently fired off by Warren: “On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands … And I will ban fracking—everywhere”. If that eventuality happened, it would greatly wound the US oil industry. Entire oilfield services industries would cease to exist in the US, and Canadian shale would be the big winner, along with huge oil companies, where the price gains from the tightened supply would offset other losses.
FINSUM: Analysts estimate this would send oil prices up around 60%, but it would really hurt the US oil industry.
The oil market has been in an interesting period since at least 2014. In the years prior, many had been worried about the concept of peak oil, or the idea that the world was past its peak output of oil and that supply would grow ever tighter. Then the shale boom happened and the world was suddenly floating in the stuff, causing prices to plummet. Now we are somewhere back in the middle as there are genuine concerns about supply at the same time as growing demand. Shale growth is slowing in the face of capital constraints and pipeline issues, and “The Saudis are just about out of spare capacity”, according to a top energy adviser.
FINSUM: We think the concerns over supply are legitimate enough that they will be supportive of prices even if we are slowly headed towards recession. That said, we think more supply will come to market to meet demand than many anticipate.